Update re Sound Energy Morocco East Moroccan Tax

Source: www.gulfoilandgas.com 7/13/2022, Location: Africa

The transitional energy firm Sound Energy declared on September 30, 2021 that its wholly owned subsidiary Sound Energy Morocco East Ltd ("SEME") had submitted to the Moroccan Court its appeal of the remaining charges brought against SEME in connection with the Moroccan Tax Administration's assessment of the October 2018 signing of a new petroleum agreement for exploration at Greater Tendrara (the "New Petroleum Agreement").

Under the remaining charges against SEME the Moroccan Tax Administration alleged that SEME had disposed of assets to Schlumberger in entering into the New Petroleum Agreement, triggering a claimed total taxation liability for SEME of approximately US$2.55 million (the "Remaining SEME Charges"). The Company remains of the strong opinion that the Remaining SEME Charges result from an incorrect interpretation by the Moroccan Tax Administration of the entry of the New Petroleum Agreement.

SEME has now been informed that the tribunal pronounced its decision in a public hearing in respect of the Remaining SEME Charges, with the judge rejecting SEME's demand for the annulment of the prior decision of the commission in respect of the Remaining SEME Charges (the "Notification").

The Notification does not provide reasons for, or details of, the tribunal's decision.

The tribunal's reasons for the decision will be available in due course. SEME will then consider the tribunal's reasons and decide what further steps it will take including but not limited to lodging an appeal.

In addition to the Remaining SEME Charges, the Moroccan tax claims against Sound Energy Morocco SARL AU ("SEMS") related to the Tendrara Lakbir Exploration Permits and the transfer of Operatorship from SEMS to SEME (the "SEMS Claims") remain in due process. Under the SEMS Claims the Moroccan Tax Administration purports a so-called disposal for nil consideration of intangible assets by SEMS to SEME.

Further announcements will be made, as appropriate, in due course.

Graham Lyon, Sound Energy's Executive Chairman, commented:

"We are both surprised and disappointed with this ruling. Clearly, this is not what was expected and reflects poorly on the application and understanding of the applicable legislative code in Morocco. We will both appeal to the Moroccan higher courts and reflect on the ruling with the various Moroccan ministries given its impact for new entrants into Morocco.

It remains perplexing that the entry of a new petroleum agreement awarded by Government agreement, with its own exploration work commitment negotiated with the State of Morocco and covering different geographic areas/time periods, can be purported to be a 'sale' of acreage previously surrendered to the Government.

Confusion has arisen due to a previous notification by the Company on 23 July 2018 whereby an entrant into the Tendrara Lakbir licence was postulated. This transaction never occurred. The Greater Tendrara exploration licence is not the continuation of the Tendrara Lakbir exploration licence.

We believe an error has been made and, whilst the Company, together with its advisors, continues to seek to engage constructively with the authorities, Sound Energy will continue to defend its rights through the Courts in relation to all outstanding claims."

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