One of AIM’s 2016 success stories, Sound Energy (SOU:AIM) is in recovery mode after a big sell-off in response to a disappointing result from the Badile well in Italy. We think the shares are attractive at the current 53p level.

Badlie was a highly anticipated gas exploration well onshore Italy which had been in the works for several years, so it is unsurprising the market reacted badly to the news it had failed to land a commercial discovery.

Now at roughly half its 12-month high, the future direction of the share price depends on the company’s progress in Morocco.

Directors have been backing the company with their own money. Greenberry, connected to non-executive director Marco Fumagalli, acquired 200,000 shares at a price of 49.58p. Chief executive James Parsons bought 53,158 shares at just over 47p.

After a mixed result from drilling on its Sidi Moktar licence in central Morocco, the company plans to take the rig back to its Tendrara block in the east of the country and resume operations at that location.

An independent audit of reserves at Tendrara and a final investment decision on a development plan for the asset are expected by the end of 2017. Both could provide catalysts for the stock.

While the recent news was disappointing, the reaction to the Badile well looks overdone and we see scope for upside. 

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