Stock market weakness has given investors an ‘unmissable’ opportunity to pick up shares in SDX Energy (LON:SDX, CVE:SDX). That’s the view of oil companies expert Malcolm Graham Wood who has commented on today’s latest well success.
Amid Tuesday’s broader market sell-off, SDX shares were down 2.25p or 4.12%.
SDX today revealed positive well testing results for the recently drilled ONZ-7 well at the Sebou permit, onshore Morocco.
Highest test results at Sebou to date
ONZ-7 achieved an average flow rate of 10mln cubic feet of gas per day during the test. The well will now be prepared for production, with the connection to nearby infrastructure anticipated in the coming days.
"Today's positive update on ONZ-7 reaffirms our view that the Sebou permit has the potential to be highly cash generative for SDX,” said Paul Welch, SDX chief executive. “Furthermore, the maximum flow rate during this test of 15.34MMscf/d is the highest achieved to date in the basin.
“This provides us with further confidence in being able to deliver our gross production target of 8-10MMscf/d of conventional natural gas in Morocco by the end of 2018."
SDX owns a 75% interest in the Sebou permit, where recent drilling activities have yielded a number of positive results.
Sebou proving to be an outstanding investment
“This is another good result from the Sebou permit which is proving to be an outstanding investment by SDX and seems to get better all the time,” Graham Wood said in a note.
He added: “The recent visit to SDX in Morocco showed that these expectations are totally achievable and that this production is extraordinarily high margin, today’s fall in the share price as a result of recent market weakness is therefore an opportunity not to be missed.”
Ongoing drill programme
The ONZ-7 well was drilled down to a depth of 1,167 metres and uncovered 5 metres of net conventional gas pay, in the Hoot formation, which as the company highlighted, was found to be “on prognosis”. Reservoir quality was reported to be better than the company expected, with porosity measuring 35.3%.
ONZ-7 was followed on the drill schedule by the KSS-2 development well, also at Sebou, where drilling began at the end of last week (and the programme is expected to run for 10-15 days).
Like ONZ-7, the KSS-2 well will be tested and connected to the field infrastructure for production, if drilling is successful.
KSS-2 is the sixth well in a nine well campaign onshore Morocco.
The company plainly has several more share price catalysts to serve up to the market, meanwhile, the well successes to date will provide production and revenue growth as the operations at Sebou scale up.