Sound Energy plc ($SOU)

Good afternoon, and welcome to the Sound Energy plc Investor Presentation. [Operator Instructions] Before we begin, I would like to submit the following poll. And I would now like to hand you over to CEO, Majid Shafiq. Good afternoon to you.

Good afternoon. Thanks, Alex, and welcome, everybody that's on the call. So the reason we're having this call today is obviously to update the market and our shareholders and others, potential investors who are interested on the transaction that we announced a couple of days ago. So the first -- so we've got a slide deck here. It's not very long. It's about 10 or 12 pages. And after that, we'll answer the questions that have been sent through and also many others have come through during the presentation itself. So moving on to the first slide. So the transaction rationale, in other words, why was this transaction necessary and a number of reasons. One of the main reasons was the state of the company's balance sheet. And we've got some numbers there that many who are listening in are probably aware of these, but they really explain the situation with respect to the balance sheet, and that's essentially down to the amount of debt that the company had, which was unsustainable. We just published our year-end '25 financial statements. And if you look at those, you can see the company has net liabilities of GBP 5.1 million. So essentially, the debt overrides the asset value on an accounting basis, so negative GBP 5.1 million. That's not a reflection of the quality of the assets. It's just a reflection of how much leverage we've got. We're a small company before we made this announcement, market cap was about [ $14 ] million. But our debt was $57 million. That's the projected debt at the end of July, which is when we think this transaction might close. So $57 million and our annual interest burden is $1.8 million. Remember, as a company that doesn't have any revenue -- so this -- the balance sheet was effectively made it very difficult for us to do anything essentially to function properly as a business, whether that's an oil and gas business or any other kind of business. It just made it very, very difficult for us to do that. So when we're going out to look for financing options, it's difficult to speak to the market because of the amount of debt that we've already got and the fact that we don't have any revenues, our ability to repay any new debt. And when we're talking to counterparties, obviously, we want to grow the business. It's very difficult to have sensible conversations with counterparties when they don't think that you can raise finance to conclude the deal. So the debt was essentially hang stringing the company. So that's one aspect. The other aspect is was how our projects in Morocco were going, so Tendrara Phase 1 in particular. Now the assets are very good. The problems we've had are essentially long delays. So Phase 1 was originally FID-ed in January 2022. And at that point, we were projecting first gas 2 years after that, so in early 2024. And that financing was based on a vendor financing withal providing financing. They're going to build the project, the Micro-LNG project, and we were going to lease it back from them. And they couldn't provide their share of financing. So that contract was converted to an EPC contract in January of 2025. And at that point, we were with Italfluids which are forecasting first gas in October 2025. And as the market knows, our current forecast is Q3 of this year. So that's significantly late than when we first started. So revenues will be over 2 years late. And obviously, in the meantime, our debt servicing obligations have continued whilst we haven't had any revenue. So the delays themselves on the project allied with the overleveraged balance sheet basically meant that it's been very, very difficult to fund ongoing operations. And then the Phase 2 development, which is a bigger development remember, Phase 2 is where the most significant cash flow is going to come from the Tendrara project. That FID is still under evaluation by the partners. So we haven't got to an FID yet. There has also been significant cost inflation across the industries, but specifically in our industry as well, which has meant that the cost estimates for the project have increased, and we now have significant pre-amp FID costs that we didn't previously have. When we did the original sale to Managem in December 2024, that deal included a carry of around about $22 million. And at that point in time, based upon when we were expecting FID to be taken and first gas to be 2 years after that FID. And based on the cost estimates at the time, that carry plus the debt that we would get and will get on the project would have funded our share of the equity for that project. That's no longer true because of the delays that we've had here in first gas. Obviously, our calculations have always assumed cash flows from Phase 1 would help with Phase 2 and obviously, we haven't started cash flow from Phase 1 yet. So issues with the project and delays in cost escalations have caused us really good problems. And -- so the transaction itself, $57 million is the consideration that we've received. That is essentially accelerating the value of Phase 1. And the value of Phase 1 is -- this is a multiple of the value of Phase 1. I think our research analyst has a valuation of around $11 million for Phase 1. So what this transaction does is effectively accelerate the cash flows that we would have got from Phase 1 and gives us some value for Phase 2. So from that perspective, that number is actually a good number, bearing in mind that Phase 2 has not yet even been FID-ed. So in summary, debt service, project delays, cost inflation has meant it's been really, really difficult to fund our ongoing obligations. So what does this do to the transaction or what is the transaction? So the transaction is a sale of Sand Energy Meridja Limited. That's a corporation that holds our interest in the exploitation concession. We're exiting from [ Anwal ] and the Grand Tendrara exploration permit. So it's being done as a package essentially. And from our perspective, if we're not in the development project, it would make it very -- it makes it more difficult if you're a third party trying to access existing infrastructure. I'm talking about tariffs now. So if we just have the exploration permits. So the value of those assets is much less if we're not actually a participant in the infrastructure that's going to evacuate those fluids. Gross proceeds, as we mentioned, $57 million. And what it does is it effectively allows us to completely deleverage the balance sheet. So we've got $25 million -- just over $25 million -- sorry, EUR 25 million sitting in the Eurobonds. And we struck a deal with around about 30% of the bondholders. So about 30% of the bondholders to repurchase those at around about 68% of face value, assuming that repurchase happens at the end of July. And we won't be paying any of the deferred interest. So the effective discount is much higher than 68% -- sorry, yes, we're paying less than 68% because we're not paying deferred consideration. We'll also be able to completely replay the [ Air ] gas bank loan, which is secured against shares in subsidiary which has helped to fund the Phase 1 development. And there's also a smaller debt with [ AWB Bank ] for about $3 million, which will also be paid back. So this will -- the $57 million will allow us to completely repay the debt and we'll end up with a cash balance of around about $11 million at the end of July with a really simple balance sheet and some cash on the balance sheet, which will allow us to function again as a corporation that has access to capital markets, whether that's debt or equity and has the ability to talk to counterparties with some credibility. So essentially, as I said, what this does is it gives us a much stronger balance sheet and will allow us to grow. So we're fixing the company's balance sheet by paying off the debt. What that means is that we will have access to a lower cost of capital. And we saw what the cost of capital is for the company in the recent equity raise and the recent bridging loan that we obtained from the market, which were -- both of them were very, very expensive, and that's because of the state of our current balance sheet. If we were to do that -- those financings now, we certainly will be able to get much, much better terms than the terms we were forced to take essentially. And as I said earlier, this allows us to have proper conversations with counterparties. And we have been speaking to other industrial counterparties about deals, both in renewables and in E&P. And we've submitted some nonbinding offers, which essentially have been rejected because of the state of our balance sheet and counterparty is questioning whether they be able to access whether it's equity or debt to be able to finance those deals. So this partially solved that problem. As I said earlier, it accelerates value from Phase 1. We've got a little bit of capital, $11 million. That's not a massive sum of money, but it does allow us to help finance potential acquisitions. So this is essentially allowing us, as I say, it's allowing us to function again and grow the business outside of Morocco and potentially within Morocco in the renewable space. So how are we going to build the next phase of growth for the company? So what do we have in the company now? So we've got -- at the top there, we've got an experienced management team. There's 8 people in the company in London. I'm not including the Board in that, there's 8 people staffed in the company, of which 4 are new. So there's 4 new people that have come in over the last 8 to 9 months, including myself and Andy. And we've got very deep technical expertise here, and we've got the people that are in the company are all relatively old, so we've been operating in the markets for several decades. So with a very large network that we can speak to as we're looking to grow the business inorganically. So I think we've got the assets in terms of the people to be able to source deal flow and execute on that deal flow. And by fixing the balance sheet, we'll be able to finance that deal flow as well. We do have an existing business in Morocco called Tayra, which is actually just about to be set up and should be set up in early June. We are now designated as a cash sale. That's what [indiscernible] considers us to be. However, once we get Tayra up and running, and what I mean by that is the development started, then that would effectively, I believe, remove our cash shell status. And Tayra is a joint venture with Gaia, which is an established Moroccan solar power developer. We have HyMaroc, which is hydrogen and helium exploration joint venture with a technical company called Getech. HyMaroc is we regard it as a very, very low-cost option on upside in transition energy products, hydrogen and helium. It's costing us actually nothing at the moment. We are -- we've done some work to identify prospective areas in Morocco and the next stage is to speak to the authorities of Morocco to try and get an exploration permit license. And we'll do that with very, very little commitments. And then once we've actually done analyzed grab back data to work with the prospectivity, we go out and find third parties to finance more expensive CapEx such as seismic data acquisition seismic or grab data and ultimately a well. We wouldn't be looking to put a lot of money into. We'd be looking to use third-party financing to develop that. And then as I say, just sits in the balance sheet gives us funding gives us the ability effectively to finance at market rates rather than very, very expensive rates. And as I mentioned, we've got a pipeline of deals that we're looking at, some of which we've already bid on, there's a number of others that we're still [indiscernible]. So just quickly to talk about Morocco's solar opportunity because that's the business that we have in Tayra. So Morocco essentially is a really large and growing renewables market. The Morocco government has significant plans to grow renewables from roughly 25% generating capacity at the moment to 52% by 2030, probably not going to meet that, but they are putting incentives in place both for wind and solar and a lot of investment come in for both of those power generation types. Solar is very profitable in Morocco for a number of reasons. One, the obvious reason is there's a lot of sunshine in Morocco. So from an radiation perspective, it's a very, very good place to build solar parks. Government has liberalized the medium voltage market. So this is the smaller end of the market, which allows companies to come in and get involved in the market. So that's the sector that we're accessing. And we're also allowed to access the commercial and industrial market, which gives us much better prices and obviously, therefore, improves the economics. So it's a very, very good opportunity in Morocco. I think we're not the first mover. There are others in there, obviously. We're one of the first movers in the medium voltage sector. And this is a business that we are looking to start very, very soon once the setup of Tayra is done. And so Tayra, this slide here on Tayra itself. So as I said, it's a 50-50 joint venture with a company called Gaia, which is a private Moroccan renewable energy company, specifically solar is what they're focused on. We announced the -- we've announced this, obviously, in the past, the shareholder agreement was announced -- sorry, signed in March. And probably next week, we're hoping to get the final setup done so we can start work. The thing about the projects, the medium voltage projects is that they're very quick -- have a very quick time line to first production, so roughly 6 months. Projects are obviously very, very simple compared to oil and gas projects. Solar panels with inverters essentially, we are looking -- and ultimately, we will look at projects that will have some battery storage, but they're very, very simple projects and very low CapEx compared to what we used to in terms of oil and gas. There's a strong supply chain operating in Morocco already from China. So most of the solar panels and ancillary equipment comes from China. And it can be financed 80% with debt and the Moroccan banks are financing these projects at that level. So that amount of leverage that can be put on the subsidiary. And as I mentioned earlier, we're allowed now because of the deregulation, we're allowed now to sell power directly to commercial and industrial end users, which pay a premium to the price -- effectively the regulated price to local distribution companies would pay, which means that we can get IRRs of 10% to 15%, which are not oil and gas IRRs, which are 30%, but they're much less risky obviously, than oil and gas projects. Once these -- they're very simple to construct once they're on stream, they're on stream for decades, require very little O&M and effectively provide long-term stable annuity type income. So we're very excited about Tayra, the 17 sites that we're looking at, which we [indiscernible] we put in 4 permits, permit has been granted. So this is -- these are projects that are going to start very soon. We have also been encouraged by the authorities to look at high-voltage projects. So there is -- we do have a site location for possibly 200-megawatt high-voltage power plant as well. I mentioned HyMaroc earlier. As I said, this is -- essentially it's a low-cost option for us. The next thing is to obtain a permit and then do work prior to bringing in third-party financing for -- so in terms of the acquisition strategy, this is our plan for growth through strategic M&A essentially. So this is what we're looking at. We're being very disciplined about this. So we've got strict criteria in terms of what we're looking at in terms of the target assets, the geographic focus, the characteristics of the assets that we're looking at in terms of their economic characteristics. We are targeting -- so the key is that we're targeting cash flowing assets and ideally cash flowing assets that we can acquire small multiples of cash flow. If it's -- we're looking at both renewables and we're looking at oil and gas assets, there are opportunities in Morocco to grow through M&A in the renewable space. If we're looking at oil and gas assets, that will be outside of Morocco. So there will be a new country entry. If it's a new country entry, then we're looking at opportunities, jurisdictions, locations that were out scalable so that we can grow those -- that new asset base. And cash -- because we're looking at cash flowing assets, those are assets that can be financed because they've got cash flow through various means. So our focus is on cash flowing assets for that one reason. But obviously, we want to put cash flow in the business. This is a company that's never had cash flow, which is why it's got the problems that it currently has. So every business needs to have cash flow, and that's obviously a massive important priority for us. So the focus isn't on buying development assets, it's on buying cash flowing assets. Obviously, if they come with development opportunities, that's what we want to see. especially if those development opportunities can be funded through the cash flow that we're buying. And if we've got cash flow, it enables us to put a structured acquisition financing package together, which minimizes equity dilution. So in terms of capital allocation, how do we want to run the business going forward with respect to how we deploy capital, how we access capital. And obviously, that's been the issue that's played Sound Energy. So obviously, we want to be -- I mean, I think the key word is discipline. We want to be very disciplined about how we allocate capital. We want to maintain reasonable debt ratios, whether that's debt to equity or debt to cash flow ratios, debt to EBITDA, those to be sensible. The debt must be serviceable by the businesses that we've got. We're very focused on getting the Tayra assets online because the low CapEx exposure to us from an equity standpoint, and we can get them online pretty quickly. And we can start growing that business organically from the cash flows from the first projects. The assets, as I said, they've got to be financeable at low cost. And we're looking for assets that are not complex, whether that's from a subsurface or a surface perspective. Tayra is complex from both perspectives. The reservoir is fracture reservoir, not the easiest reservoir to develop. And the Micro-LNG project is -- there are not many Micro-LNG projects in the world. So that is a complicated project to develop. So we're going to be very disciplined about where we put the money. We've got strict criteria of where we want to look and the type of assets that we want to buy. And ultimately, it's all driven by making sure that we will have a strong conservative balance sheet that can ensure that we can grow the business without it being at risk at no cost in terms of an equity standpoint. So executing the growth strategy. So this is essentially what we are -- what we're doing with this transaction and in the near term, how we're going to execute on that plan to grow the business both organically and inorganically. So the first thing to do was that we had to do was effectively to repair the company, repair its balance sheet so it can function properly as a corporation and be attractive to capital markets. And this transaction, that's what this transaction is trying to do. We want to get tail moving forward because that's a real business that we've got in front of us. It's an easy business to execute on. It doesn't require a large amount of financing. And the debt is essentially already was booked in Morocco. That debt financing is already there [ 80% ] of the financing for those projects is essentially lined up. And then we're setting up the business to grow through M&A. So all we want to do is successfully execute on an M&A transaction, whether that's a corporation or an asset transaction, but to try and do that relatively quickly to diversify the business outside of Morocco and outside of the renewable business that we currently got. And finally, so what following the transaction, what we'll have is a company with a clean and simple balance sheet, a company that can operate in the markets, whether that's the capital markets or whether that's the markets for transactions. We've got a transition business, transition energy business, renewable power business that can grow organically to significant scale in Morocco, which ultimately, once it's amortized the debt, will produce significant free cash flow for decades. So that's long-term growth that we would be locking in through the renewable business in Morocco. And then we've got -- we'll have a platform that can grow through disciplined M&A outside Morocco.

If I may just jump back in there. Thank you for your presentation. [Operator Instructions] I would like to remind you that the recording of this presentation along with a copy of the slides and the published Q&A can be accessed by your investment dashboard. Majid and Andy, as you can see, we have received a number of questions throughout today's presentation. If I may now hand back to you, kindly ask you to read out the questions where appropriate to do so, and I'll pick up for you both at the end. Thank you.

Yes. Okay. So I think what we'll do is we had a number of questions that were submitted before the presentation, and we'll try and run through those first before we start answering questions that on the screen. And so I'll start with question one, which was, if shareholders do not approve the disposal, what's the Board's plan for funding Eurobond management Phase 1 participation and maintaining [ 20% ] Tendrara interest? So the Board has obviously looked at multiple options to try and continue with the business as it currently is. And that's looking at funding options, looking at potentially bringing in maybe farming out more of the interest to provide some funding. So this has been going on for a period of months. I've been in the company now about 7 months, I think. And ever since I arrived, this has been what we've been doing, which is essentially trying to fix the balance sheet and make sure that we can fund our operations. And unfortunately, that's all we've been doing and really what we need to be doing is looking at growing the business beyond Tendrara and that's what we should have been looking at. So the Board has looked at a number of different -- as the executive looked at a number of different options. And this disposal really is the best course of action for the company. That's what the concluded and the other options that we're looking at proved not to be executed on. So question two, why is the company really pushing [ Anwar ] and waiving any rights in Grand Tendrara rather than preserving exploration upside or negotiating a royalty success payment or free carry structure? So we negotiated a deal with Managem and the deal that Managem wanted was essentially the whole package. So it wasn't just Tendrara. So that's the deal that we've ended up with. Question three, we had a carry on 2 wells and we're receiving compensation for that. So the $57 million consideration is the total compensation for everything. So it includes everything that sits within Meridja and that sits within any assets that sit within Meridja or [ Aaron ], which is where the exploration assets lie.

Okay. Thank you, Majid. I'll take question 4. Given the company's April '26 presentation, stated Phase 1 production and sales were expected in Q3 2026 and the disposal [ RNS ] states that first gas is expected in Q3 2026. Why is the Board chosen to sell Sound's remaining 20% interest now rather than wait for first gas and potentially a strong valuation? Well, I think the key issue here is the timing of that first gas, and that is the issue. As you heard from Majid at the beginning of this presentation, FID for Phase 1 was taken in 2022 when first gas was scheduled for January '24. Following the change to the to the Italfluids contract. First gas was then delayed to October 2025 and the latest estimate is Q3 2026. So that delay to funding means that we've missed out on all those revenues. Those revenues are badly needed by the company to progress the company into Phase 2. And so it's really that those delays are -- and the uncertainty around when we're going to get first gas is one of the key reasons for why we've chosen to take the decision that we have now.

Next question. I think...

Question 6, I'll take this as well. Sales -- the sale generates USD 57 million, but how much have we spent in developing the asset in Morocco? I think there's 2 parts to that. The first part is the money that we spent Sound Energy Morocco East, which was sold to Meridja when we did the original farm-out the 55% was $32 million spent by the company through that vehicle. And then a further $19 million has been expended on the production concession through Sound Energy Meridja, which is what holds current 20% of what is being purchased now in this transaction by management. So that's a total of $51 million that we spent on the project in total.

Okay. Question 7. Investors have been hoping for many years that there would be an ongoing cash generation from our business to why has this been ended? I think we've answered that question in the presentation. I think we've answered why we've done the transaction. Question 8 is, if the disposal completes and Sound becomes a [ 15 ] cash, what specific acquisition strategy, cost controls and shareholder protections will be in place to prevent the remaining cash being eroded by overheads or acquisitions or further dilution? On the cost control, we've been focused on cost control since I've arrived here. And we have actually just looked at this last week, the costs for this year up to the end of April are 23% lower than they were for the same period last year. So we've been looking at all our contracts. We've tendered a number of contracts. We've moved into a new smaller office. So we are heavily focused for obvious reasons on cost control. I mentioned earlier that once Tayra starts developing an asset, we'll be speaking to our about that cash and [indiscernible]. And as we explained in the presentation, one of the main reasons that we've done this transaction to try and fix the balance sheet provide us with a little bit of cash for growth. So we are -- and we're taking a very disciplined approach to what we look at, what we try to buy. So we're obviously not going to want to do poor acquisitions. We're going to want to minimize dilution for shareholders as well. So I think we are taking the actions that I think we need to take to effectively ensure that the company can continue to grow its business initially Tayra and then through acquisitions. Question 9, Mr. [indiscernible] has reacted to this sale with a [ 40% ] drop in our share price. Does that not indicate to you how investors do not think this is transformational, but in fact selling off our assets too cheap. Now that is clearly that is what the market is saying. The market reacted and doesn't like the transaction that we've done. But what we're trying to explain to the market is that we don't have -- we haven't found a solution to the funding gap that's developed for Tendrara. And we need a solution for that, obviously, for the company to continue operating. And what we've come to the conclusion is that it's actually better to accelerate the realization of cash flows from Tendrara. So Tendrara Phase 1 is 10 million scots a day gross. We're over 2 million scots a day. So net to us, cash flowing EBITDA is about $5 million. That is not enough per annum, that is not enough to fund Phase 2. So it's actually better to accelerate the cash flows that we're going to receive from Phase 1 and Phase 2 if and when it comes on stream to accelerate that now and pocket the $57 million so that we can repay the debt and be left with cash on the balance sheet that we can grow the business with and develop our solar power business in Morocco, as I said, and start growing outside of Morocco. What question 10, what is the future plan for [ City Mar ]? So we're in discussions with regarding an extension to that petroleum agreement. So this deal doesn't include on. That's still an asset that we operate. As I say, we're in discussions to extend the petroleum agreement.

Okay. I'll take question 11, Majid. What alternatives were considered before agreeing to sell the entire remaining Moroccan gas interest, including Eurobond refinancing, restructuring, asset level debt, royalty financing or partial farm down or waiting for Phase 2, 1 revenues to begin? Well, I think we've dealt with waiting for Phase 2 revenues to begin with the delays that we've been experiencing. But effectively, there's 3 ways we can get cash into the business. The first is via debt. Well, the company has got enough debt, too much debt. It's highly leveraged both at the plc level by the Eurobonds and at the asset level by the Africa Gas loan note, which is secured against us. So we really didn't have any more capacity to absorb any more debt. The second way is equity. And as Majid explained, the equity markets are effectively closed to the company because of the stretched leveraged balance sheet. The market has seen the delays to first gas which adds more equity risk to the story. And then when you add on the escalation of costs, it just means that the equity market is close to us. And when we raised the GBP 0.5 million that you saw recently by an equity raise, we suffered a 37% discount to raise that money. So that's the market telling you the sort of risk premium that they're attaching to that equity. And the third way that we can get money into the company is to farm down the asset some more. And we have looked at that, and we have explored that. We've only got 20% remaining in this asset now. And so most companies, when they're looking for a new country entry, they want at least 20%, maybe more 25%, 30% to make it worthwhile. Very few companies are interested in maybe taking a 10% stake in the asset. And so we've exhausted that revenue as well.

Yes. Okay. Question 12, please explain the rationale for selling Sound Energy's entire interest, including future drilling revenues such a inflection point when first revenues are finally due from the Phase 1 development. This is not what shareholders want to believe it's not to be in their interest for the long-term appreciation of the company please clarify the commercial benefit of doing so. So I think that was essentially what we've explained in the presentation. Question 13, please, can you explain what the 200-megawatt sites will be wind or solar and any updates on hydrogen project? I think again, that was answered in the presentation, but it's all solar. As you mentioned, [ City ] in discussions with and continuing to evaluate prospective areas prior to discussing with potential licensing. Question 14, please explain how the decision to divest and sell Morocco assets is in the best long-term interest of shareholders? Again, that was the subject of the presentation.

[indiscernible] 16. When the buyout took place, that's the original farm-out, surely someone must have looked at the figures and said that the revenues we will get will not cover our cost base, and we can't survive. And if so, why was -- if that was the case, why was the deal done? This refers to the sale of Sound Energy Morocco East, the 55% interest in to Managem. But at the time, based on the consideration that we received from that deal, that was sufficient to see the company through to first gas. But that first gas was predicated on October 2025. So we've had more delays to the start-up of Phase 1. We've had cost inflation. And the other issue that we've had is FID was supposed to be taken on Phase 2 in late 2025. FID has still not been taken on Phase 2. And so when you include all those factors together, that's meant that the money that we got from the original farm-out to Managem has not been able to see us through to first gas and also to FID of Phase 2 of the project. And then in the background behind all that, you need to remember that we're servicing a huge amount of debt, which is costing us nearly $2 million a year in interest.

Okay. Question 17, Give me the good reason why should investors seeing the share price consistently dropped over the past year or so what's going to change? Well, this -- as I said earlier, this new management now in the company. So with a new business plan essentially, we've -- this transaction will repair the balance sheet, hopefully will give us access to the capital markets to provide finance to do good acquisitions, which we have got a very rigorous criteria. And the solar power development in Morocco, I think, is very exciting and will ultimately generate a lot of value for the company and its shareholders and carries much, much lower risk than oil and gas developments and lasts for a very long time in terms of the income that it provides. Okay. I think those were all presubmitted questions. How much time do we have to run through the rest of these questions?

So you've got another 20 minutes, 19 minutes.

[indiscernible] submitted ones. And just if you want to [indiscernible]. Okay. First question after the pre-submitted ones. It feels like we at such a late stage explained that we would be cash generative and self-funding and now suddenly they are unsustainable. Well, I think, again, we've explained why we're in the situation we are. And principally, that's an overly rich balance sheet and delays to the project. And those delays to the project for various reasons, principally firstly, that the vendor financing wasn't there when it's supposed to be there, which meant that -- there were delays on the supply chain because the suppliers are being paid as they should have been paid and that just ended up causing some of the delays that we see. But the issue essentially is that the company, for whatever reasons historically has just taken on too much debt, which has meant it's been very difficult for it to continue to raise finance. It hasn't been in production, so it hasn't generated any cash flow, and that's a really difficult position to be in. If you're trying to develop an asset which has got high CapEx, service and you've got delays. So those are issues that are very, very difficult to resolve. Well, the question you are projected $11 million cash balance if the transaction proceeds, what is the projected net asset position at the same date. I don't have that on an accounting basis. But what's more important to us is -- I mean, we mentioned earlier that the net assets, we have negative net assets as of year-end 2025, with negative net assets as of now. And what's important is cash at the end of the day, and this is going to generate positive cash for us on the balance sheet, which might not sound like a lot, but I think we can do a reasonable amount with $11 million in terms of trying to grow the business in terms of the M&A that we're looking at the counter that we're looking at.

I'll take one of these questions here. All of the money is repaying the bondholders and the loans, but nothing for us retail shareholders at all as usual there really no way of restructuring to make it fairer for all those involved. The issue that we've got is that the balance sheet debt is of such a magnitude that there's -- by the time we've paid that off and we've got some capital to run the business and to put in new projects, there's really not very much left. And we need to go into this new phase with all the debt eliminated. What we found with discussions with equity providers and also with industry counterparties is that they -- we need to be in a position where we're speaking to them in a debt-free process and the debt-free condition so that we can raise equity and we're not hindered in those processes by having this debt or otherwise, counterparties in the markets will see us as risk if we continue to have any debt on the balance sheet.

So question here, why do we still need so many expensive executives? No, we're nothing more than [indiscernible] as a Chairman, Exploration Manager, who's done little if anything for 10 years leaving the company. As I mentioned earlier, there are only 8 people in the company. And we need -- we're not -- I know that we've designated as a cash in my mind, we're not the cash. We've got a business that's about to start up in Morocco solar power business. And we are looking at multiple acquisition opportunities. As a public company, you need a minimum number of people at a minimum size of Board, which is what we've got. Our Chairman is now non-Exec Chairman. So if we want to continue the business, we need a minimum number of people. As I also said, there's a lot of experience in the company, decades of experience across multiple sectors. And I think that we will be successful going forward now that we've the balance sheet. So this financial situation is not new to Sound has been known for about 2 years, why we were supposed to be carried on 2 wells, why have we given the value in the company so little why wasn't a percentage of future sales revenue negotiated [indiscernible]. So we struck a deal with Managem, which is the best deal that was on the table. It's not only Managem that we were talking to about this type of transaction that we were talking to others as well. So the best deal that was on the table. And as I mentioned earlier, $57 million is an acceleration of significant value. It goes beyond the value of Phase 1. Remember, the only project that is out there at the moment is Phase 1. Phase 2 is not yet FID-ed, and it's not financed. So the real value is in Phase 1, which itself was not yet on stream and $57 million is a multiple of that value. So we've actually accelerated the value. And we keep going on about the balance sheet, but the debt that we've got on the balance sheet is not something that we can forget about and ultimately, we would have to repay that debt. And we had a Eurobond which has already been restructured twice and is due for repayment at the end of next year. And that isn't a problem that we can just leave until the end of next year. And next year -- the end of next year will come very quickly. And if we don't restructure it now on favorable terms, so we are getting a very good deal on buying back that bond early, we'll be faced with a much bigger -- the amount that we're going to have to pay is obviously going to be much larger for the face value of course that we get to that repayment date. So what this deal does is effectively fixes the company and it allows it to continue, and we're pretty confident that we're going to be able to grow it. Did the bondholders ultimately -- did you answer that question? Did the bondholders ultimately force the company into this transaction? The answer is no, no. The bondholders -- obviously, we've been in discussion with the bondholders or the company has with the bondholders for years. And they didn't force us into this transaction. We recognize that we had a problem with the balance sheet. It's not just the euro bonds, it's also the debt that we have with Africa Gas is a significant burden. So absolutely not, we weren't forced into it by the bondholders. How would you rank the company's performance over the last 5 years? So my -- obviously, I haven't been here for 5 years. But from my understanding, the -- if you stand back and look at what the company has achieved in Morocco, just from an operational standpoint, I know that the operational standpoint is not what we should be looking at. We should be looking at whether it's creating value for shareholders. And in that respect, it hasn't been a huge success. But it's been plagued with a number of difficulties that are not of its own making. And just from what the company has been able to achieve in terms of bringing online -- almost online now a development from a very difficult reservoir from a subsurface perspective with a very difficult -- not difficult, but a complex Micro-LNG development in the desert in the East of Morocco. That is a major achievement for Sound Energy, and it's a major achievement for the Morocco State and Morocco States use it that way. The problem is that the company historically raised too much finance -- debt finance. And it's been straggled by that. It's never been able to release itself from that debt because it's not generating the cash flow quickly enough for other reasons. So yes, I think if you look at the performance over the last 5 years, you can't say that it's been a huge success. But it's been plagued by an issue that lots of small oil and gas companies have been plagued by, which is long delays, operational delays, which these projects often see and the markets, which haven't helped from a financing perspective. But obviously, that's the history. And what we want to do is to now put the company on a stable footing such that it can grow through accretive deals and it can execute on the business that it still has -- will have in Morocco, which is a solar power business, which is a very, very different beast to complicated Micro-LNG gas development. The very, very simple projects and very low risk and very predictable. That's what we will have in Morocco and its ability to grow that very, very significantly. I mean if we can get 300-plus megawatts on stream from PV, we'd be the biggest producer from solar power in Morocco. I'm not talking about CSP, which is bigger. So yes, I mean, I think the business -- we have to look at the business going forward. Given a lot of shareholders have been here for 10-plus years and have been let down by management team the team, what are you going to do differently to keep us around start seeing growth as 90% down. Well, we've explained in the presentation what we do we want to do to grow the business. And we're pretty confident if the transaction goes through that we can successfully grow the business, both the renewable business and the oil and gas business. So we are not just focused on renewables. Obviously, we're also looking at the entire energy spectrum, including renewables and also including hydrocarbon production. So what are we going to do differently? We're certainly not going to leverage up the balance sheet to the extent that leverage up. And we're going to make sure that we are attractive to the capital markets. And I don't just mean equity markets. I mean debt market, structured finance markets and also to our peers, whether that's in the renewable sector or whether that's in the oil and gas sector, we have to see to be a credible counterparty to do deals. Following these moves, will the company be replacing staff to properly reflect the new direction non-Morocco and expertise. As I said earlier, we're actually a really, really small group. If we want to do deals, we need a certain amount of capacity within the company to evaluate deals properly. And I think we're at that level. So we've got very, very experienced staff in the business across the energy spectrum that we're looking at. So renewables, we will look at infrastructure opportunities and also E&P opportunities within that 8 people, we have expertise across that entire sector space.

I think I'll take this question and that probably even a bit of final question. I'll take this one as a final question. When the share consolidation was announced, should the sale not have been announced at the same time? Surely, the consolidation was an attempt to cushion the inevitable share price pressure on the sale of the announcement. Firstly, when we did the nominal price reset and the share consolidation, we were not involved in discussions in this transaction. This transaction only came to light recently. The reason that we did the nominal price reset and the share consolidation was that the nominal price was such that the share price meant that we were in a position where we could not go out and possibly raise any money if we wanted to by the issue of equity and small listed companies should not be in a position where they can't issue stock. So that was the reason to do that. And we did raise a little bit of equity, GBP 0.5 million as you saw a couple of months ago. And that was a very painful exercise, which taught us a lot about how the market was viewing the risk of the company because we had to conduct that placing at a [ 37% ] discount, which is something that we don't want to be ever doing again in the future.

Andy, Majid, thank you very much indeed for addressing those questions from investors today. But Majid, before I direct investors for the feedback, could I just ask you for a few closing comments, if that's okay.

Yes. I mean, look, clearly, there's a lot of frustration in the market, and I understand that and that's understandable why people would be frustrated. The share price hasn't performed well over the last few years and the cash flow generation that was supposed to be seeing from Moroccan development hasn't realized, hasn't happened. And we've talked at length of why those issues are present and what the company has had to struggle with. And we really -- what we're doing is really what we believe is the best option for the company. I think the $57 million realization from these assets is significant value compared to the -- if you do an NPV calculation on Phase 1, there's significant value. We at some point, we've got to clean up the balance sheet to be able to function properly going forward. It just has to be done. If you just look at how small we are relative to the amount of debt that we've got, that just had to be fixed at some point in time and cash flows from Phase 1 are not going to fix that problem. So we've had to fix the problem, and we want to build a business, a scalable energy business across the energy space, renewables, oil and gas, et cetera. And we think we've got skills within the company to do it. And I think once we -- now that hopefully, the transaction will go through will get through, we'll have a company that's structured properly to be able to execute on new business opportunities without overleveraging the debt and putting over leveraging the balance sheet, sorry, and putting ourselves in the same position that we're currently in.

Perfect. Thank you once again for updating investors today. Could I please ask investors not to close this session. I ask you now be automatically redirected to provide your feedback, which will help the company better understand your views and expectations. On behalf of the management team, we would like to thank you for attending today's presentation, and good afternoon to you all.