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SDX Energy spuds new well at South Disouq project

“Success at Ibn Yunus will de-risk a large portion of that volume which would be very significant for our shareholders."

oil and gas operations
The Ibn Yunus-1X well is expected to take 30 days to drill.

SDX Energy Inc (LON:SDX, CVE:SDX) told investors that it has now spudded the Ibn Yunus-1X exploration well at South Disouq project, Egypt, following last year’s SD-1X discovery.

Ibn Yunus-1X is the first of four planned new wells at South Disouq, and it will be followed by two appraisal wells and another exploration well.

The new well is expected to take 30 days to drill.

READ: SDX Energy's financials confirm “exceptional” year of growth

"I am very excited to be back drilling in the South Disouq concession. The success of the SD-1X well proved the existence of source rock in this area which was our biggest uncertainty pre-drill,” said Paul Welch, SDX chief executive.

“The technical work that's been completed by our team after the first successful well has provided us with additional confidence in our ability to identify conventional natural gas bearing intervals within the 3D seismic data set.

He added: "We currently have over 300 km2 of 3D seismic in the block with identified potential of up to 2 trillion cubic feet (gross) of conventional natural gas.

“Success at Ibn Yunus will de-risk a large portion of that volume which would be very significant for our shareholders. I look forwarding to reporting on our results in due course."

SDX highlighted that its development plan for South Disouq sees a plateau rate from the SD-1X field of 50 million standard cubic feet per day, though with further exploration success, the rate could potentially double, up to 100 MMscf/d. 

Production from the field is anticipated in the second half of this year.

Broker upbeat as attention shifts back to Egypt

“Following the recent drilling successes in Morocco, attention shifts back to Egypt for SDX, where a successful programme would not only underpin the planned development at South Disouq, but potentially add significant new resources,” said Ashley Kelty, analyst at Cantor Fitzgerald.

Cantor has a ‘buy’ recommendation for SDX, with a 64p price target which suggests some 30% upside to the current price.

Kelty added: “The well is targeting the same gas-bearing intervals encountered in the SD-1X well in April 2017 and in the success case would de-risk a large proportion of up to 2tcf in prospective resources identified on 3D seismic.”

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Price: 17 GBX

Market: AIM
Market Cap: £34.91 m

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on 04/08/2019

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