TRADING AND OPERATIONS UPDATE 6 MONTHS TO 30/06/21
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 AS IT FORMS PART OF UK LAW BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018 ("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.
12 July 2021
SDX ENERGY PLC ("SDX" or the "Company")
TRADING AND OPERATIONS UPDATE FOR THE SIX MONTHS TO 30 JUNE 2021
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 six months ended 30 June 2021. All monetary values are expressed in United States dollars net to the Company unless otherwise stated.
Mark Reid, CEO of SDX, commented:
"It has been a busy period for the Company, with multiple drilling campaigns running in tandem and successful results to show for our efforts already. We are very pleased that our three appraisal/ development wells drilled in Morocco are commercial successes, with two of the wells already connected and producing, contributing to average production of 5,930 boe/d for the period, above our 2021 guidance. The outlook for the remainder of the year is exciting as we look forward to results of the IY-2 step-out development well at South Disouq as well as spudding and drilling the Hanut well, which if successful could provide a transformational resource increase for SDX. We look forward to updating the market on these key catalysts in due course."
Six months to 30 June 2021
· Average entitlement production for the period of c.5,930 boe/d, 3% higher than 2021 mid-point market guidance of 5,770 boe/d.
Gross Production Actual -
6 months ended 30 June 2021
Gross Production Guidance - 12 months ended 31 December 2021
Entitlement Production Actual (boe/d) -
6 months ended 30 June 2021(1)
Entitlement Production Guidance (boe/d) -
12 months ended 31 December 2021
South Disouq - WI 55%
44 - 46 MMscfe/d
4,415 - 4,430
4,300 - 4,500
West Gharib - WI 50%
2,350 - 2,650 bbl/d
510 - 520
446 - 505
Morocco - WI 75%
7.0 - 7.3 MMscf/d
990 - 995
874 - 915
5,915 - 5,945
5,620 - 5,920
(1) Subject to final June invoicing
Morocco and Egypt drilling
· The first phase of the Morocco drilling campaign, which consisted of three appraisal/development wells in SDX's operated Gharb Basin acreage in Morocco (SDX: 75% working interest), was successfully completed in June 2021.
· The OYF-3, KSR-17 and KSR-18 wells were all commercial successes, with OYF-3 and KSR-17 already connected and producing into the Company's infrastructure, with KSR-18 to be tested and connected shortly. Management estimates that 1.5-1.6bcf of gross resources have been added by these wells, which is in line with pre-drill P50 estimates. Preparations are underway for the drilling of up to two additional wells in Morocco later in the year.
· During the first half of the year, the Company received the COVID-19 delayed laboratory analysis of the cuttings and side wall cores from the LMS-2 well. This information confirmed that LMS-2 had successfully encountered the targeted thermogenic gas source that exists in the Top Nappe horizon but that the reservoir in the Lalla Mimouna Nord concession has low permeability and the well is unlikely to flow conventionally. As such, the Company will not risk US$0.5 million testing this well, nor will it commit to further investment in the Lalla Mimouna Nord concession post the end of the concession date in July 2021 as a result of the limited likelihood of it being commercially developed. Accordingly, the Company expects to recognise a US$10.3 million non-cash impairment charge in Q2 ahead of relinquishment, of which US$2.8 million relates to LMS-2.
· In South Disouq, the IY-2 step-out development well, the first of a two-well campaign, was spud in late June with the Company expecting to update the market on its result later in July. The second well, the HA-1X exploration well on the Hanut prospect, is expected to spud after the completion of IY-2 in early August. HA-1X, which is targeting gross unrisked mean recoverable volumes of 139bcf with a 33% chance of success, is expected to take approximately one month to drill and the Company expects to update the market on its result in mid-September.
· In West Gharib, following the ten-year concession extension granted earlier in 2021, preparations continued for a campaign of three to four development wells, the first of which is expected to spud in early Q3.
· Capex for the six months to 30 June 2021 is shown below and is compared to an updated guidance figure of US$26.5-28.0 million (previous guidance US$25.0-26.5 million):
Guidance - 12 months ended 31 December 2021
Actual - 6 months ended 30 June 2021
South Disouq - WI 55%
US$7.0 - 7.5 million
West Gharib - WI 50%
US$2.5 - 3.0 million
Morocco - WI 75%
US$17.0 - 17.5 million
US$26.5 - 28.0 million
(1) Includes US$0.6 million of expenditure that was pre-paid as a project milestone in 2020 but has now been reclassified to capex
(2) Includes US$0.5 million of non-cash decommissioning provisions
· Capex guidance for Morocco for the 12 months ended 31 December 2021 has been increased by US$1.5 million as the wells planned for the second phase of the 2021 campaign in the second half of the year are deeper, requiring greater drilling time, than those included in the original guidance. Group 2021 capex guidance is now US$26.5 - 28.0 million.
· H1 2021 expenditure by asset was as follows:
o South Disouq: US$3.7 million of capex for the compressor project (US$1.5 million), the IY-2 development well (US$0.6 million), the completion of the SD-12X tie in (US$0.4 million), planning for the HA-1X exploration well (US$0.2 million), the workovers of SD-4X and SD-1X (US$0.2 million) and other CPF projects.
o West Gharib: US$1.2 million on well workovers and development drilling preparations; and
o Morocco: US$10.9 million on three development wells (US$8.9 million, including US$0.5 million of decommissioning provisions) and a well workover campaign (US$2.0 million).
Cash and liquidity
· Cash and liquidity remains strong with cash as at 30 June 2021 of c.US$9.1 million and the US$10.0 million EBRD credit facility remaining undrawn and available.
· Together with cash generated from operations, the Company is fully funded for all of its planned activities in 2021 and 2022.
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 two producing assets: a 55% operated interest in the South Disouq gas field in the Nile Delta and a 50% non-operated interest in the West Gharib concession, which is located onshore in the Eastern Desert, adjacent to the 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.
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
Chief Executive Officer
Tel: +44 203 219 5640
Stifel Nicolaus Europe Limited (Nominated Adviser and Joint Broker)
Tel: +44 (0) 20 7710 7600
Peel Hunt LLP (Joint Broker)
Tel: +44 (0) 207 418 8900
Billy Clegg/Owen Roberts/Violet Wilson
Tel: +44 (0) 203 757 4980
stock tank barrel
barrels of oil per day
billion cubic feet
barrels of oil equivalent per day
thousands of cubic feet
million standard cubic feet per day
million standard cubic feet equivalent per day
means that there is at least a 50% probability that the quantities actually recovered will equal or exceed the best estimate.
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 2021 production and capex guidance, liquidity and sources of cash flows in 2021, the impact of COVID-19 on customer consumption, and future drilling developments and results 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 2020, which can be found on the Company's website at https://www.sdxenergy.com/ and 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 forward‐looking information, except as required by applicable law. The forward‐looking 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 31 December 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.