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SDX Energy PLC - TRADING AND OPERATIONS UPDATE

RNS Number : 0247B
SDX Energy PLC
05 October 2020
 

THE INFORMATION CONTAINED WITHIN THIS ANNOUNCEMENT IS DEEMED BY SDX TO CONSTITUTE INSIDE INFORMATION AS STIPULATED UNDER THE MARKET ABUSE REGULATION (EU) NO. 596/2014 ("MAR"). ON THE PUBLICATION OF THIS ANNOUNCEMENT VIA A REGULATORY INFORMATION SERVICE ("RIS"), THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.

 

 

5 October 2020

SDX ENERGY PLC ("SDX" or the "Company")

TRADING AND OPERATIONS UPDATE FOR NINE MONTHS TO 30 SEPTEMBER 2020

 

SDX Energy Plc (AIM: SDX), the MENA-focused oil and gas company, is pleased to provide an unaudited update on its operating results and cash and liquidity position for the nine months ended 30 September 2020. All monetary values are expressed in United States dollars net to the Company unless otherwise stated.

 

Mark Reid, CEO of SDX, commented:

 

"We have continued to perform strongly in the second half of 2020 despite challenging global conditions. Production is ahead of guidance; we have a healthy cash and liquidity position; and we now plan to accelerate an exciting and potentially transformational drilling campaign in South Disouq into Q2/Q3 2021.

 

In addition, as a result of the recent LMS-2 well in Morocco, and further work interpreting existing 3D seismic data, we are very encouraged by a new prospective horizon that we have identified and which we believe is present throughout our acreage.

Gas consumption from our Moroccan customers is now back to around 90% of pre-COVID-19 restriction levels and we go into the final quarter of 2020 with momentum, exciting and new prospectivity and strong cash generation."

 

 

Nine months to 30 September 2020

 

Production

 

·      Average entitlement production for the period of between 6,488-6,598 boe/d, an increase of 85-89% from same period in 2019 and exceeding current guidance of 6,000-6,250 boe/d

Asset

Gross Production Actual -

9 months ended 30 September 2020

Gross Production Guidance - 12 months ended 31 December 2020

Entitlement Production Actual (boe/d) -

9 months ended 30 September 2020

Entitlement Production Guidance (boe/d) -

12 months ended 31 December 2020

Core assets

 

 

 

 

South Disouq - WI 55%

50.0 - 51.0 MMscfe/d

47 - 49 MMscfe/d

4,583 - 4,675

4,300 - 4,460

West Gharib - WI 50%

3,300 - 3,325 bbl/d

3,200 - 3,300 bbl/d

629 - 634

610 - 630

Morocco - WI 75%

5.7 - 5.8 MMscf/d

5.3 - 6.0 MMscf/d

713 - 725

663 - 750

Non-core asset

 

 

 

 

NW Gemsa - WI 50%

N/A - now disposed

N/A - now disposed

513

385

South Ramadan - WI 12.75%1

390 - 400 bbl/d1

Nil

50 - 51

42

Total

 

 

6,488 - 6,598

6,000 - 6,267

1.        South Ramadan has been producing since 13/5/20 with production now stabilized at c.600-700bbls/d.  Production in table is a daily average taken back to 1/1/20  

·      Moroccan customers back to c.90% of their March 2020 pre-close down consumption levels.

 

Drilling and prospectivity

 

·      South Disouq two-well drilling campaign completed during the period, with the second well, SD-12X (100% W.I.), being a commercial discovery in the Kafr el Sheikh ("KES") Formation, and management estimating 24 bcf of recoverable resources. Work is underway to connect SD-12X to the Company's gas processing plant via a 5.8km flow line to the Ibn Yunus-1X well location with production start-up expected in Q1 2021. Based upon well-test data, it is anticipated that when connected the well will produce at a stabilised rate of 10-12 MMscf/d.

 

·      Following the success of SD-12X at South Disouq and further review of the 3D seismic, management has now high-graded c.233bcf of mean unrisked recoverable volumes, which are; close to our existing infrastructure, located in horizons that are either productive in South Disouq or in adjacent blocks and which have now been high-graded to ready-to-drill prospects. This increase of 137bcf from the Company's previous estimates of c.96bcf is primarily attributable to the identification of the Hanut prospect which Company the estimates has an unrisked mean recoverable volumes of 139bcf.

 

·      Subject to receipt of final Ministerial and Parliamentary approval of the two-year extension to the South Disouq exploration area, which has already been approved by EGAS, the Company plans to accelerate its drilling campaign to Q2/Q3 2021 from late 2021/early 2022.  The campaign will commence with the drilling of the two commitment wells proposed for the extension which will target c.165bcf in the Hanut and Mohsen prospects. The Company's 45% partner has still to confirm whether they will participate in the proposed extension.

 

·    Management's estimate of the mean prospective resources and chance of success of the prospects identified in the South Disouq area are shown below.

Prospect Name

 

Working Interest %

Interval

Concession

Detail

Comment

Unrisked Mean (bcf)

Chance of Success (%)

Hanut

55-100(1)

KES

Proposed 2 Yr(2) exploration extension

Single Target

139

33

Mohsen

55-100(1)

KES

Proposed 2 Yr(2) exploration extension

Single Target

26

51

El Deeb

55-100(1)

Qawasim

Proposed 2 Yr(2) exploration extension

Single Target

22

29

Ibn Newton/Newton

55-100(1)

KES/Abu Madi

Proposed 2 Yr(2) exploration extension

Dual Target

16

40-45

Shikabala prospects (two wells)

100

KES/ Qawasim

Up to 25 Yr Development Lease to 31 August 2045

Single Target & Dual Target

16

25-40

Warda

55

KES

Up to 25 Yr Development Lease to 2 January 2044

Single Target

14

35

Total

 

 

 

 

233

 

(1)       Working interest % dependant on Partner's decision to participate in the extension

(2)       2 year extension period commences on date of Parliamentary approval

 

·      The Company continues to identify exciting areas of prospectivity in South Disouq and expects to provide further updates as appropriate.

 

·      The 2019/20 Moroccan drilling campaign has resulted in seven commercial discoveries from nine wells drilled, with the tenth well, LMS-2, completed and awaiting crew mobilisation for testing once COVID-19 restrictions are lifted. Discoveries at OYF-2 and BMK-1 confirm the prospectivity in SDX's existing core production and development area extends to the north, and have de-risked c.20 bcf of P50 prospective resources.  

 

·      Further analysis of the LMS-2 well results and a re-interpretation of the 3D seismic across SDX's concessions has revealed that structures similar to LMS-2 are present throughout the Company's acreage.  This new prospectivity is located in horizons that are slightly deeper than the Company's core production and development area and the areas previously targeted in Lalla Mimouna.   Work is ongoing to further define the scale of this prospectivity and, subject to a successful flow test of LMS-2, the intention is to target it as part of the planned 2021 Moroccan drilling campaign which we will also seek to accelerate into H1 2021.

 

Capex

 

·      Capex for the nine months to 30 September 2020 continues to track guidance as shown below and reconfirms that the majority of planned capex for 2020 has already been incurred;

Asset

Guidance - 12 months ended 31 December 2020

Actual -9 months ended 30 September 2020

Core assets

 

 

South Disouq - WI 55%

US$10.7 million

US$8.0 million(1)

West Gharib - WI 50%

US$2.0 million

      US$0.7 million

Morocco - WI 75%

US$13.5 million

 US$13.2 million(2)

Non-core asset

 

 

Total

US$26.2 million

US$21.9 million

(1)         Includes US$0.2 million of non-cash decommissioning provisions

(2)         Includes US$0.5 million of non-cash decommissioning provisions

 

 

Cash and liquidity

 

·      Cash and liquidity remains strong with cash as at 30 September 2020 of c.US$9.2 million and the US$7.5 million EBRD credit facility remaining undrawn and available up to 1 November 2020 at which point it will amortise to US$2.5 million of availability.

 

·      Together with cash generated from operations, the Company is fully funded for all of its planned activities in 2020 and 2021.

 

 

About SDX

SDX is an international oil and gas exploration, production and development company, headquartered in London, United Kingdom, with a principal focus on MENA. In Egypt, SDX has a working interest in three producing assets: a 55% operated interest in the South Disouq gas field in the Nile Delta, a 50% non-operated interest in the West Gharib concession, which is located onshore in the Eastern Desert, adjacent to the Gulf of Suez, and a 12.75% non-operated interest in the South Ramadan concession offshore Gulf of Suez. In Morocco, SDX has a 75% working interest in five development/production concessions, all situated in the Gharb Basin. The producing assets in Morocco are characterised by attractive gas prices and exceptionally low operating costs. SDX has a strong weighting of fixed price gas assets in its portfolio with low operating costs and attractive margins throughout, providing resilience in a low commodity price environment. SDX's portfolio also includes high impact exploration opportunities in both Egypt and Morocco.

 

 

For further information, please see the Company's website at www.sdxenergy.com or the Company's filed documents at www.sedar.com

 

Competent Persons Statement

In accordance with the guidelines of the AIM Market of the London Stock Exchange, the technical information contained in the announcement has been reviewed and approved by Rob Cook, VP Subsurface of SDX. Dr. Cook has over 25 years of oil and gas industry experience and is the qualified person as defined in the London Stock Exchange's Guidance Note for Mining and Oil and Gas companies. Dr. Cook holds a BSc in Geochemistry and a PhD in Sedimentology from the University of Reading, UK. He is a Chartered Geologist with the Geological Society of London (Geol Soc) and a Certified Professional Geologist (CPG-11983) with the American Institute of Professional Geologists (AIPG).

 

For further information:

 

SDX Energy Plc

Mark Reid

Chief Executive Officer

Tel: +44 203 219 5640

 

 

 

Stifel Nicolaus Europe Limited (Nominated Adviser and Joint Broker)

Callum Stewart

Simon Mensley

Ashton Clanfield

Tel: +44 (0) 20 7710 7600

 

Peel Hunt LLP (Joint Broker)

Richard Crichton

David McKeown

Tel: +44 (0) 207 418 8900

 

Camarco (PR)

Billy Clegg/Owen Roberts/Violet Wilson

Tel: +44 (0) 203 757 4980

 

 

 

 

A Corporate presentation reflecting the information in this Press Release is available on our website; https://www.sdxenergy.com/investors/results-centre/

 

Glossary

 

"bbl"

stock tank barrel

"bbl/d"

barrels of oil per day

"bcf"

billion cubic feet

"boe/d"

barrels of oil equivalent per day

"Mcf"

thousands of cubic feet

"MMscf/d"

million standard cubic feet per day

"MMscfe/d"

million standard cubic feet equivalent per day

 

 

Forward-looking information

 

Certain statements contained in this press release may constitute "forward-looking information" as such term is used in applicable Canadian securities laws. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or are not statements of historical fact should be viewed as forward-looking information. In particular, statements regarding the Company's 2020 production and capex guidance, liquidity and sources of cash flows in 2020 and 2021,the impact of COVID-19 on customer consumption, future drilling developments and results, and extending the tenor and re-establishing the full availability of the US$10 million credit facility with the EBRD should all be regarded as forward-looking information.

 

The forward-looking information contained in this document is based on certain assumptions, and although management considers these assumptions to be reasonable based on information currently available to them, undue reliance should not be placed on the forward-looking information because SDX can give no assurances that they may prove to be correct. This includes, but is not limited to, assumptions related to, among other things, commodity prices and interest and foreign exchange rates; planned synergies, capital efficiencies and cost-savings; applicable tax laws; future production rates; receipt of necessary permits; the sufficiency of budgeted capital expenditures in carrying out planned activities, and the availability and cost of labour and services.

 

All timing given in this announcement, unless stated otherwise, is indicative, and while the Company endeavours to provide accurate timing to the market, it cautions that, due to the nature of its operations and reliance on third parties, this is subject to change, often at little or no notice. If there is a delay or change to any of the timings indicated in this announcement, the Company shall update the market without delay.

 

Forward-looking information is subject to certain risks and uncertainties (both general and specific) that could cause actual events or outcomes to differ materially from those anticipated or implied by such forward-looking statements. Such risks and other factors include, but are not limited to, political, social, and other risks inherent in daily operations for the Company, risks associated with the industries in which the Company operates, such as: operational risks; delays or changes in plans with respect to growth projects or capital expenditures; costs and expenses; health, safety and environmental risks; commodity price, interest rate and exchange rate fluctuations; environmental risks; competition; permitting risks; the ability to access sufficient capital from internal and external sources; and changes in legislation, including but not limited to tax laws and environmental regulations. Readers are cautioned that the foregoing list of risk factors is not exhaustive and are advised to refer to the Principal Risks & Uncertainties section of SDX's Annual Report for the year ended 31 December 2019, which can be found on SDX's SEDAR profile at www.sedar.com, for a description of additional risks and uncertainties associated with SDX's business.

 

The forward-looking information contained in this press release is as of the date hereof and SDX does not undertake any obligation to update publicly or to revise any of the included forwardlooking information, except as required by applicable law. The forwardlooking information contained herein is expressly qualified by this cautionary statement.

 

 

Oil and Gas Advisory

Certain disclosures in this news release constitute "anticipated results" for the purposes of National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities ("NI 51-101") of the Canadian Securities Administrators because the disclosure in question may, in the opinion of a reasonable person, indicate the potential value or quantities of resources in respect of the Company's resources or a portion of its resources. Without limitation, the anticipated results disclosed in this news release include estimates of volume, flow rate, production rates, porosity, and pay thickness attributable to the resources of the Company. Such estimates have been prepared by Company management and have not been prepared or reviewed by an independent qualified reserves evaluator or auditor. Anticipated results are subject to certain risks and uncertainties, including those described above and various geological, technical, operational, engineering, commercial, and technical risks. In addition, the geotechnical analysis and engineering to be conducted in respect of such resources is not complete. Such risks and uncertainties may cause the anticipated results disclosed herein to be inaccurate. Actual results may vary, perhaps materially.

Use of the term "boe" or the term "MMscf" may be misleading, particularly if used in isolation. A "boe" conversion ratio of 6 Mcf: 1 bbl and a "Mcf" conversion ratio of 1 bbl: 6 Mcf are based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

 

Prospective Resources Data

 

The prospective resources estimates disclosed or referenced herein have been prepared by Dr. Rob Cook, a qualified reserves evaluator, in accordance with the SPE's Canadian Oil and Gas Evaluation Handbook and in accordance with NI 51-101.   The prospective resources disclosed herein have an effective date of 1 January 2020. Prospective resources are those quantities of gas, estimated as of the given date, to be potentially recoverable from undiscovered accumulations through future development projects. As prospective resources, there is no certainty that any portion of the resources will be discovered. The chance that an exploration project will result in a discovery is referred to as the "chance of discovery" as defined by the management of the Company.

 

There is no certainty that it will be commercially viable to produce any portion of the resources discussed herein; though any discovery that is commercially viable would be tied back to the Company's pipeline in Morocco and then connected to customers' facilities within 9 to 12 months of discovery. Based upon the economic analysis undertaken on any discovery, management has attributed an associated chance of development of 100%.

 

There are uncertainties associated with the volume estimates of the prospective resources disclosed herein, due to the level of information available on prospective resources, but ranges are defined based on data from the Company's nearby existing analogous wells. Some of the risks and uncertainties are outlined below:

·      Petrophysical parameters of the sand/reservoir;

·      Fluid composition, especially heavy end hydrocarbons;

·      Accurate estimation of reservoir conditions (pressure and temperature);

·      Reservoir drive mechanism;

·      Potential well deliverability; and

·      The thickness and lateral extent of the reservoir section, currently based on 3D seismic data.

 

"P50" means that there is at least a 50% probability that the quantities actually recovered will equal or exceed the best estimate.

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