TIDMSDX
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 Gross Production Entitlement Entitlement
Actual - Guidance Production Production Guidance
9 months ended - 12 months Actual (boe/d) (boe/d) -
30 September ended 31 - 12 months ended
2020 December 9 months ended 31 December
2020 30 September 2020
2020
Core assets
-------------------- ------------------ ---------------- ---------------------
South Disouq - WI 50.0 - 51.0
55% MMscfe/d 47 - 49 MMscfe/d 4,583 - 4,675 4,300 - 4,460
-------------------- ------------------ ---------------- ---------------------
West Gharib - WI 3,300 - 3,325 3,200 - 3,300
50% bbl/d bbl/d 629 - 634 610 - 630
-------------------- ------------------ ---------------- ---------------------
5.3 - 6.0
Morocco - WI 75% 5.7 - 5.8 MMscf/d MMscf/d 713 - 725 663 - 750
-------------------- ------------------ ---------------- ---------------------
Non-core asset
-------------------- ------------------ ---------------- ---------------------
N/A - now
NW Gemsa - WI 50% N/A - now disposed disposed 513 385
-------------------- ------------------ ---------------- ---------------------
South Ramadan - 390 - 400 bbl/d
WI 12.75% (1) (1) 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 Interval Concession Comment Unrisked Chance
Interest Detail Mean (bcf) of Success
% (%)
Proposed
2 Yr(2) exploration
Hanut 55-100(1) KES extension Single Target 139 33
---------- --------- --------------------- --------------- ------------ ------------
Proposed
2 Yr(2) exploration
Mohsen 55-100(1) KES extension Single Target 26 51
---------- --------- --------------------- --------------- ------------ ------------
Proposed
2 Yr(2) exploration
El Deeb 55-100(1) Qawasim extension Single Target 22 29
---------- --------- --------------------- --------------- ------------ ------------
Proposed
KES/Abu 2 Yr(2) exploration
Ibn Newton/Newton 55-100(1) Madi extension Dual Target 16 40-45
---------- --------- --------------------- --------------- ------------ ------------
Up to 25
Yr Development
Lease to
Shikabala prospects KES/ 31 August Single Target
(two wells) 100 Qawasim 2045 & Dual Target 16 25-40
---------- --------- --------------------- --------------- ------------ ------------
Up to 25
Yr Development
Lease to
2 January
Warda 55 KES 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 - Actual - 9
12 months ended months ended
31 December 30 September
2020 2020
Core assets
----------------- --------------------
South Disouq - US$10.7 million US$8.0 million(1)
WI 55%
----------------- --------------------
West Gharib - WI US$2.0 million US$0.7 million
50%
----------------- --------------------
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 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 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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