Sonde Resources' CEO Discusses Q4 2013 Results - Earnings Call Transcript

| About: Sonde Resources (SOQ)

Sonde Resources Corp (NYSEMKT:SOQ)

Q4 2013 Earnings Conference Call

March 28, 2014 03:30 PM ET


Rene Beaumier - CFO

Toufic Nassif - President and CEO


Alistair Toward - PI Financial


Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Sonde Resources Corporation Fourth Quarter and Year-end 2013 Conference Call. At this time all participants are in a listen only mode. Following the presentation will conduct a question-and-answer session. Instructions will be given at that time for you to queue up for questions. (Operator Instructions) I would like to remind everyone that this conference call is being recorded on Friday, March 28, at 1:30 p.m. Mountain Time. I will now turn the conference over to Mr. Rene Beaumier, CFO. Please go ahead, sir.

Rene Beaumier

Thank you. Good afternoon. Before commencing with remarks regarding the year-end 2013 earnings conference call, I would like to let everyone know that I am joined by Toufic Nassif, President and Chief Executive Officer of the company. I will review our cautionary remarks regarding forward-looking information that may be discussed in our call.

Some of the statements we will be making today constitute forward-looking information within the meaning of applicable Canadian securities law and forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These statements include, among others, those concerning the status of the Farm-Out in North Africa, or anticipated operational plans and activities, including our development and exploration program in North Africa; our capital programs and sources of funding; Sonde strategy and the expectation of successful future results.

Forward-looking statements can generally be identified by the use of words such as anticipate, believe, expect, plan, intend, estimate, propose, project and similar expressions suggesting future outcomes or statements regarding an outlook. Such forward-looking information and statements are based on a number of risks, uncertainties and assumptions, which may cause actual results or other expectations to differ materially from those anticipated and which may prove to be correct. Assumptions have been made regarding, among other things, operating conditions, management's expectations regarding future growth, transform results of drilling activity, availability of capital and capital and other expenditures.

Actual results could differ materially due to a number of factors including, without limitation, operational risks and development, exploration; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve and resource estimates; the uncertainty of estimates and projections in relation to production; risks affecting Sonde's ability to execute projects and market oil and natural gas; risks inherent in operating in foreign jurisdictions; the ability to attract and retain key personnel; and the inability to raise additional capital.

Although we believe that the expectations reflected in the forward-looking information or statements are reasonable, prospective investors should not place undue reliance on forward-looking statements because the company can provide no assurance that such expectations will prove to be correct. We base our forward-looking statements on information currently available, and do not assume any obligation to update them unless required by law.

Listeners should refer to the forward-looking statements disclaimer in our press release issued yesterday, March 27, 2014 and our annual information form for the year ended December 31, 2013, which are both located on SEDAR for more information regarding the risks and uncertainties facing Sonde.

I will now turn the conference over to Toufic Nassif, President and Chief Executive Officer.

Toufic Nassif

Thank you, Rene. Good afternoon, everyone and thank you for joining us for this year-end 2013 conference call. We really appreciate you joining us and, as Rene has mentioned we issued a press release, we posted our audited year-end 2013 financial statements, our management and discussions analysis for annual information form on SEDAR, yesterday evening. As you know, the last few months have been an eventful time period for Sonde, with significant transaction with Marquee Energy Ltd, for our Western Canadian assets. The failure of the Viking deal and expansion of our drilling commitment of the Fisal-1 well after November 30, 2014. Instead of spending time reviewing the year-end documents, I'd like to make some brief remarks and then turn over the call over for questions.

Sonde management worked diligently to formally close the Marquee transaction which was one of the top priorities for the company in 2013. The closing of the Marquee arrangements on December 31, 2013 marks a new and strategic path forward for Sonde, under which our shareholders will be able to participate in the value creation potential of Sonde assets in North Africa in a very focused manner.

Management’s other key priorities was the closing of the closing of the Viking Farm-Out in 2013. Unfortunately, Viking was unable to meet its obligation to fund its share of the bank guarantee, as per the formed assignment or the assignment agreement, and as such the agreement was terminated. While Viking failure to close the agreement was a disappointment for ourselves and our shareholders, it does not diminish our enthusiasm for the significant potential of the Joint Oil Block or the commitment we have to our strong partnership with Joint Oil.

We have recently signed an agreement with Taylor-DeJongh, an independent investment banking firm to aggressively but selectively market the asset and seek a deal that recognizes and rewards the value proposition that Sonde shareholders own.

During 2013, Sonde was able to restructure the exploration drilling program for the Joint Oil Block and extended drilling of the Fisal well for December 2013 to November 2014. This extension will allow us more time to fund the drilling rig to complete exploration commitment and we’re pleased to say that we’ve been in discussions with several operators and we’re planning -- our plan is to bring at least Tunisia in 2014 and we expect for this system to be tap in Joint Oil, to give us a slot -- to allow us to drill Fisal in 2014 as on scheduled as agreed by Joint Oil. Preparation for the drilling is ongoing. The long-lead items have been ordered and will be delivered to us in Tunisia in July.

Sonde also completed the acquisition of 200 square kilometers of 3D seismic covering the Hadaf prospect in Libyan waters. The data is currently being processed. We’re excited about this opportunity and we expect to have it completed by mid-April 2014. This is the processing we’re talking about. Interpretation of the processed data will commence immediately thereafter.

At this point, we will now take questions and I will now turn the conference to the operator.

Question-and-Answer Session


Thank you. Ladies and gentlemen, we will now conduct the questions and answer session. (Operator Instructions) The first question is from Alistair Toward from PI Financial. Please go ahead.

Alistair Toward - PI Financial

My first question would be on timing. Specifically the Unitization Agreement still not ratified by the government and just I guess we expected by now and obviously Sonde is not completely control with timing on this, but could you sort of update us on the timing? And also just as a follow-up to that, and obviously if this gets delayed it would seem to be and maybe you disagree a threat to the funding initiatives that’s going out on surrounding this, this project and I’m just wondering how that, if that affects the timing of drilling of the Fisal-1 well? That’s my first question.

Toufic Nassif

On the Unitization Agreement, as you know and as we did disclose earlier that we have submitted the Unitization Agreement that has been discussed and agreed with ETAP and Joint Oil and ourselves. And also which basically was the result of many-many months of discussions with the resources as well. And it’s right now with the authorities and discussion ongoing with ETAP and DGE on this Unitization Agreement. We have no – no timing has been given to us when this thing will be approved or a signature is imminent in this transaction; however, we anticipate that this will happen soon and soon could be within the next few weeks or maybe a month timeframe. I can’t commit to that, that’s this is the kind of feedback that we’re getting back from the Tunisian authorities.

Now relating to the matter of drilling Fisal, I think you have -- the Fisal well we have a commitment to finish the well by the end of November. We continue to make our preparations to do so. And the fact the approval of the Unitization Agreement in no way should perform -- will impact opposition in order to deliver the drilling of Fisal in as we agreed with Joint Oil in 2014 by November. So these are two separate matters that we’re working at the same time, two different cracks that we continue to work very hard in order to go and deliver the results we’re looking for.

Alistair Toward - PI Financial

Okay but does the not having the Unitization Agreement in hand at all hinder your ability to raise capital?

Toufic Nassif

I don’t think so because the Unitization Agreement relates to the development of the Zarat. The Zarat development will eventually take place. It’s just a matter of time, once we finish up the unitization agreement we have to look at the potential of -- the exploration potential of these wells can bring to the table. The potential of these exploratory they’re world-class and I think any potential investors are going to be looking at these things, they’re going to be looking at in isolation of Zarat and in combination with Zarat as well.

Alistair Toward - PI Financial

And actually that relates to my question. With Zarat sort of being almost an extension -- the Fisal well almost being an extension to the Zarat discovery. I’m just wondering if you were do a some sort of far mode of some of the interest in that well, how would that sort of affect the whole Zarat thing, just wondering how that would all work?

Toufic Nassif

Alistair as you recall, the Fisal well is in the same kind of play as the Zarat discovery. At this stage of the game, we don’t know whether it’s really connected to the Zarat development until you drill the well and test it and test the pressure and reservoir when have you until that point in time, it’s we don’t want to know whether this is connected to the Zarat discovery. So these are two separate things at this stage of the game. And hence once we drilled Fisal and once we develop Zarat, at that point in time, we will be able to decrement whether these things are connected or not. So at this stage of the game two separate place.

Alistair Toward - PI Financial

Okay next question just with the regards to the drilling rig that you’re in discussions with, does this give you sort of better understanding of what the well cost are and what are we expecting with the Fisal-1 well cost to be the double cost?

Toufic Nassif

We’re still looking at the 40 million that we kind of projected earlier based on our analysis and based on the engineering and preparation that’s we’ve done.

Alistair Toward - PI Financial

And then just last question on the new Directors, obviously they’ve got a lot of experience in them and of course we know your background, but are they people that you worked with before or is it just the level of experience they have in this place that brings them to the board.

Toufic Nassif

I personally have not worked with this individual directly but many board members that we have on the current board and some of the authority members of the board have worked with these individuals, I think these are world class individuals who bring a wealth of experience to the Sonde board to help us more or less to under strategic focus of the company on North Africa.

Alistair Toward - PI Financial

Perfect, that’s all I have, I appreciate the opportunity.

Toufic Nassif

Thank you Alistair, appreciate it, thank you.


Thank you. (Operator Instructions) We have no further questions at this time I would now like to turn the meeting back over to Mr. Toufic Nassif, please go ahead.

Toufic Nassif

Thank you, that will conclude the conference call for today, thank you very much for your participation and we’ll look forward to discussing the matter of Sonde and the strategic interests of Sonde in North Africa in the future, thank you.


Thank you, this concludes the conference call for today, thank you for participating. Please disconnect your lines.

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