The hotly anticipated SD-1X well, located in Egypt's Nile Delta, is targeting both oil and gas reservoirs – gas in the upper Abu Madi section, and oil is targeted in the lower AEB & Abu Roash sections. Drilling will take between 30 and 45 days.
“We are extremely pleased to announce the start of this drilling campaign, as well as the extension to the exploration period,” said Paul Welch, SDX chief executive.
“This is one of several activities, across the expanded SDX portfolio, that has the potential to further increase our reserve base and ultimately add to our high margin production base.
“We look forward to providing updates over the course of the campaign."
With a 78p price target, Cantor sees some 70% upside to the current SDX share price of 46p.
Cantor analyst Sam Wahab highlights that the company’s share of the SD-1X drilling costs are ‘carried’ by the company’s partner.
At the same time, the analyst notes that the well is targeting more than 100mln barrels and has an ‘unrisked’ valuation of US$289mln - which equates to 11.9p per share in the broker’s valuation.
Rival stockbroker WH Ireland, meanwhile, highlighted that SD-1X is the best prospect in the company’s exploration portfolio.
“The company will be carried on the well subject to a cap of $3M vs expected well cost of $3.5M; however, that does not diminish the high stakes of this well for SDX,” WH Ireland analyst Brendan Long said in a note.