TIDMSDX
RNS Number : 7931F
SDX Energy PLC
19 November 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.
19 November 2020
SDX ENERGY PLC ("SDX" or the "Company")
ANNOUNCES NINE MONTHS TO 30 SEPTEMBER 2020 FINANCIAL AND
OPERATING RESULTS
SDX Energy Plc (AIM: SDX), the MENA-focused oil and gas company,
is pleased to announce its unaudited financial and operating
results for the nine months ended 30 September 2020. All monetary
values are expressed in United States dollars net to the Company
unless otherwise stated.
SDX management will be hosting a Capital Markets Day today at
3:00pm UK time, details of which can be found in the release below.
A copy of all presentations will be available on the Company's
corporate website at www.sdxenergy.com shortly after the event has
begun at approximately 3:00pm. The webcast recording of the event
will be made available on the Company website shortly
thereafter.
Mark Reid, CEO of SDX, commented:
"I am pleased to report another strong period of production and
cash generation from our portfolio in what remains a challenging
period for businesses globally. Despite this, we reiterate our
production guidance for 2020 and feel that we are in a very strong
position to continue our excellent cash generation with
approximately 90% of revenues being derived from our fixed price
gas contracts. Our discovery at the SD-12X well in Egypt towards
the beginning of the year is quickly being developed with initial
production expected in Q1 2021.
Growth remains a key focus for the Management team at SDX and we
were pleased to announce the identification of c.233bcf of close to
infrastructure resource in drill-ready prospects at our South
Disouq concession. In Q2/Q3 2021, the Company will drill the Ibn
Yunus-2 development well to accelerate production from our existing
discovered reserve base. Immediately following this, the Hanut
prospect will target 139bcf of the 233bcf of newly identified
resource and in 2022, two further wells will target another 40 bcf.
In line with our ongoing focus on shareholder value creation, we
continue to assess the optimum allocation of capital, whether that
be investment into organic or inorganic growth projects, or
returning capital to shareholders. Our final decision on this will
always be taken with the best interests of shareholders in
mind.
We remain confident in the Group's outlook and its potential to
grow significantly in the months ahead."
Nine months to 30 September 2020 Operations Highlights
-- Average entitlement production of 6,646 boe/d, an increase of
90% from the nine months to 30 September 2019 (3,501 boe/d) and 64%
higher than average production during FY 2019 (4,062 boe/d) due to
strong production levels mainly from South Disouq, which delivered
gross production of 48.6 MMscf/d of dry gas and 467 bbl/d of
condensate (51.4 MMscfe/d) equating to 4,710 boe/d net to SDX.
-- Existing full year production guidance is maintained across
all assets at 6,000 - 6,250 boe/d, which is 48-54% higher than 2019
actual production and existing full year capex guidance is also
maintained at US$26.2 million, the majority of which has already
been incurred.
-- The South Disouq two-well drilling campaign was completed
during the period, with the second well, SD-12X (100% working
interest to SDX), being a commercial discovery in the Kafr el
Sheikh formation, and management estimating 24 bcf of recoverable
resources. Construction 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 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 further review of the 3D seismic at SD-12X,
c.233bcf of close to infrastructure, mean unrisked recoverable
volumes, located in productive horizons have been high-graded to
ready-to-drill prospects.
-- Subject to receipt of final Ministerial and Parliamentary
approval, the Company plans to accelerate its drilling campaign to
Q2/Q3 2021 from H1 2022 with the drilling of the Hanut prospect
targeting 139bcf. The Company's partner has still to advise whether
it will participate in the well. The campaign will commence with
the Company and its partner drilling the IY-2X well, a development
well accessing reserves in the eastern portion of the Ibn Yunus
field, to bring forward production and cash flow from this asset.
The Company expects to drill the Mohsen and Warda prospects,
targeting 26bcf and 14bcf respectively, in 2022.
-- The period saw the sale of the Group's non-core North West
Gemsa asset in Egypt with the net US$1.6 million proceeds exceeding
management's expectations as well as showing the ongoing focus and
commitment to capital discipline and careful management of the
Group's portfolio whilst also providing additional cash to further
strengthen its balance sheet.
-- Moroccan drilling campaign has resulted in seven discoveries
from nine wells drilled to date, with the tenth well, LMS-2,
completed and awaiting crew mobilisation for testing, which is now
expected in 2021 due to continued COVID-19 restrictions on moving
people and equipment in and out of Morocco.
-- 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.
-- Gas consumption levels at SDX's Morocco customers have
returned to c.90% of pre-COVID-19 levels.
-- Post period end, the Company agreed to the disposal of its
non-core 12.75% working interest in the South Ramadan concession,
located offshore in the Gulf of Suez, Egypt. The purchaser,
International Oil Services, a private Egyptian oil and gas company,
has already paid the US$0.5 million consideration for the Company's
interest, which is in excess of management's internal valuation of
the asset.
Nine months to 30 September 2020 Financial Highlights
The table below reflects the results from the North West Gemsa
concession, which was sold in Q3 2020, as a discontinued operation
(as required by IFRS). All revenues, costs and taxation from this
asset have been consolidated into a single line item "profit/(loss)
from discontinued operations" in both periods reported. Per unit
metrics do not include North West Gemsa.
Nine months ended
30 September (unaudited)
US$ million except per unit 2020 2019
amounts
------------- -------------
Net revenues 33.8 23.7
------------- -------------
Netback(1) 26.6 18.9
------------- -------------
Net realised average oil service
fees - US$/barrel 31.25 49.95
------------- -------------
Net realised average Morocco
gas price - US$/Mcf 10.62 10.32
------------- -------------
Net realised South Disouq gas 2.85 N/A
price - US$/Mcf
------------- -------------
Netback - US$/boe 15.80 43.74
------------- -------------
EBITDAX(1) (2) 23.9 15.1
------------- -------------
Exploration & evaluation expense(3) 5.5 0.8
------------- -------------
Depletion, depreciation, and
amortisation 17.8 12.4
------------- -------------
Profit/(loss) from discontinued
operations 1.9 (0.3)
------------- -------------
Total comprehensive loss (2.2) (0.0)
------------- -------------
Capital expenditure 21.8 26.5
------------- -------------
Net cash generated from operating
activities(4) 14.7 7.7
------------- -------------
Cash and cash equivalents 9.9 12.6
------------- -------------
(1) Refer to the "Non-IFRS Measures" section of this release
below for details of Netback and EBITDAX.
(2) EBITDAX for nine months ended 30 September 2020 includes
US$4.0 million of non-cash revenue relating to the grossing up of
Egyptian corporate tax on the South Disouq and South Ramadan PSCs
which is paid by the Egyptian State on behalf of the Company.
(3) US$4.5 million of non-cash Exploration & Evaluation
("E&E") write offs in total are included within this line
item.
(4) Excludes discontinued operations.
-- Netback of US$26.6 million, 41% higher than the same period
in 2019, was driven by three quarters of production from South
Disouq. Morocco Netback was marginally higher despite COVID-19
shutdowns, albeit West Gharib experienced lower production due to
increased water cut and lower oil service fee realisations.
Operating expenses were US$2.6 million higher predominantly due to
South Disouq starting up in November 2019. The lower per unit
Netback of US$15.80/boe in 2020 (2019: US$43.74/boe) results from
the contribution of South Disouq in 2020 which has high volume,
lower Netback production, versus 2019 which did not include South
Disouq and therefore reflected a higher proportion of volumes from
Morocco, which achieves high Netbacks.
-- EBITDAX of US$23.9 million was 58% higher than the same
period in 2019 of US$15.1 million due to higher Netback, lower
recurring G&A expenses and lower transaction costs in 2020,
partly offset by a non-recurring stock-based compensation credit in
2019 following the departure of two senior employees.
-- Depletion, depreciation and amortisation ("DD&A") charge
of US$17.8 million was higher than the US$12.4 million for the same
period in 2019 due to South Disouq start up in Q4 2019, partly
offset by a reduced charge in Morocco following 2P reserves
additions from the recent drilling campaign in Q4 2019/Q1 2020, and
lower production.
-- Non-cash E&E write offs totalled US$4.5 million following
the drilling of two sub-commercial wells, SD-6X in South Disouq and
SAH-5 in Morocco.
-- Operating cash flow (before capex, excluding discontinued
operations) of US$14.7 million, higher than the same period in 2019
of US$7.7 million primarily due to the EBITDAX drivers discussed
above, offset by an increase in accounts receivable during the
period, and higher inventory spend.
-- Capex of US$21.8 million, reflects:
o US$13.0 million (including US$0.5 million of decommissioning
provisions) for the Moroccan drilling campaign and well
tie-ins;
o US$6.3 million for the drilling of the SD-6X (SDX: 55% working
interest) and SD-12X (SDX: 100% working interest) wells in South
Disouq (including US$0.2 million of decommissioning provisions and
a US$0.3 million development lease bonus for the SD-12X
discovery);
o US$0.9 million for the SD-12X tie in project;
o US$0.8 million for additional work and insurance spares at the
South Disouq Central Processing Facility ("CPF");
o US$0.5 million for drilling/workovers in West Gharib;
o US$0.2 million for Morocco facilities and customer
connections; and
o US$0.1 million for other assets.
-- Liquidity: Closing cash as at 30 September 2020 was US$9.9
million with the US$7.5 million EBRD credit facility remaining
undrawn. Following scheduled amortisation, the facility currently
has US$2.5 million of availability. In the coming days, the Company
is expecting to sign a new facility agreement with EBRD, with a
5-year tenor, which will re-establish US$10.0 million of
availability after satisfaction of normal CPs. In the meantime, the
existing facility will remain available.
-- Together with cash generated from operations, the Company is
fully funded for all of its planned activities in 2020 - 2022.
COVID-19 update
-- During the second half of March 2020 and into April 2020,
COVID-19 containment restrictions in Morocco temporarily impacted
our operations, with three customers being required to close their
operations. However, in early May these same customers re-started
production and as at 30 September 2020 had returned to
approximately 90% of their pre-closure consumption rates. Whilst
some restrictions have been eased, there remains uncertainty as to
when production will return to pre-COVID-19 levels and accordingly
the Company maintains its full year production guidance for the
Moroccan business of 5.3 - 6.0 MMscf/d (gross). Gross consumption
for the nine months to 30 September 2020 was 5.9 MMscf/d and the
bottom end of the updated guidance of 5.3 - 6.0 MMscf/d (gross)
reflects the potential risk of further shutdowns in the remainder
2020 if a second lockdown, or similar, is required. Egyptian
production remains unaffected by COVID-19 at present. The Company
continues to follow applicable government guidance in each of its
territories.
2020 Guidance
-- The Company's 2020 full year guidance is maintained at 6,000
- 6,250 boe/d, which is 48-54% higher than 2019 actual
production.
-- 2020 capex guidance is maintained at US$26.2 million (US$21.8
million has been spent to date including the costs of the SD-12X
pipeline project which remains on budget).
Outlook
-- The Company is well-placed to weather the current
macroeconomic uncertainties and continues to screen a number of
business development opportunities.
-- Cash generation is expected to continue strongly through the
rest of 2020 and beyond as approximately 90% of the Company's cash
flows are expected to be generated from fixed-price gas
businesses.
-- 2020, 2021 and 2022 work programmes are fully funded.
-- The Company continues to assess the optimum use of capital in
the interests of all stakeholders, whether that be investment into
new projects or returning cash to shareholders. At present the
Company is focussed on continued investment into new projects and
considers this the most appropriate use of the Company's capital.
This will be assessed on an ongoing basis.
Operations Update
Nine months to 30 September 2020 Production and Full Year
Guidance
-- Nine months to 30 September 2020 actual entitlement
production of 6,646 boe/d, an increase of 90% from the same period
in 2019, with South Disouq and West Gharib exceeding guidance. An
analysis of production by asset is as follows:
Gross production SDX entitlement production
Asset Actual - 9 Guidance Guidance Actual Actual
months ended - 12 months - 12 months 9 months 9 months
30 September ended 31 December ended 31 ended 30 ended 30
2020 2020 December September September
Gross Gross 2020 2020 2019
Entitlement Entitlement Entitlement
-------------------- -------------------- ------------- ------------- -------------
Core assets
-------------------- -------------------- ------------- ------------- -------------
South Disouq - WI 4,300 -
55% 51.4 MMscfe/d 47 - 49 MMscfe/d 4,460 4,710 -
-------------------- -------------------- ------------- ------------- -------------
West Gharib - WI 3,200 - 3,300
50% 3,353 bbl/d bbl/d 610 - 630 639 814
-------------------- -------------------- ------------- ------------- -------------
5.3 - 6.0
Morocco - WI 75% 5.9 MMscf/d MMscf/d 663 - 750 735 772
-------------------- -------------------- ------------- ------------- -------------
Non-core assets
-------------------- -------------------- ------------- ------------- -------------
N/A - now
NW Gemsa - WI 50% N/A - now disposed disposed 385 511 1,915
-------------------- -------------------- ------------- ------------- -------------
South Ramadan -
WI 12.75 % 400 boe/d - 42 51 -
-------------------- -------------------- ------------- ------------- -------------
6,000 -
Total 6,267 6,646 3,501
------------- ------------- -------------
o South Disouq (W.I. 55%) : The South Disouq asset has performed
above expectations during the nine months to 30 September 2020,
with all four wells flowing ahead of expected rates and the CPF
achieving higher than planned levels of uptime. During Q2 2020, a
well testing program was carried out as part of scheduled reservoir
management activities. Scheduled CPF maintenance is planned for Q4
2020, as are workovers of the SD-4X and SD-1X wells in Q1 2021.
These wells are experiencing higher than expected water and sand
production respectively and in Q4 2020 they will be produced at
lower rates in preparation for the workovers. Notwithstanding this,
the Company re-iterates its full year guidance of gross production
of 47 - 49 MMscfe/d.
o West Gharib (W.I. 50%): A new production well, Rabul-3, was
successfully drilled, completed, and tied into the field production
system during H1 2020. Although the existing well stock experienced
increasing water cut during the year to date, production was higher
than guidance albeit lower than the same period in 2019. Given the
above, the Company re-iterates its full year guidance of gross
production of 3,200 - 3,300 bbl/d for 2020.
o Morocco (W.I. 75%): As previously reported, following a period
of strong demand in January and February, three customers
accounting for 50% of normal daily consumption were required to
close between mid-March and early May due to COVID-19 restrictions
imposed by the Government of Morocco. Since the recommencement of
production, these customers have gradually increased their
consumption to c.90% of pre-closure levels, which is constrained by
ongoing COVID-19 containment measures. The situation in-country
remains uncertain and as a result, guidance for this business for
FY 2020 is maintained at 5.3 - 6.0 MMscf/d.
o NW Gemsa (W.I. 50%): The Company sold its 50% working interest
in this asset in July 2020, with an effective date of 1 April 2020.
Gross production to 31 March 2020 was 3,076 boe/d (1,538 boe/d net
to SDX), which equates to equivalent actual entitlement production
to the Company of 511 boe/d for Q3 2020 and 385 boe/d for the full
year. Prior to its sale, the field exceeded expectations, primarily
due to a slower rate of pressure depletion and water cut
increase.
o South Ramadan (W.I. 12.75%): South Ramadan, situated offshore
in the Gulf of Suez, commenced production in Q2 2020 at
approximately gross 350 bbl/d. Post completion of an acid
stimulation operation, production stabilised at gross 500 - 600
bbl/d.
2020 Drilling and Operations
Morocco drilling campaign update (SDX 75% working interest)
-- Having fulfilled the objectives for the Morocco campaign,
being: (i) to add 2P reserves in and around its existing
infrastructure; (ii) to determine if its existing producing area
extends to the north; and (iii) to test the prospectivity within
the Lalla Mimouna concession, the Company decided not to drill the
final two planned wells. As these last two wells would not have
been immediately tied into the Company's infrastructure or
contributed cash flows in the near term, the Company has chosen to
preserve its capital and postpone, at no incremental cost, these
last two wells for a future campaign.
-- 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.
-- The above developments will allow the Company to
significantly extend reserve life and continue to support lower
CO(2) emissions at our customers.
South Disouq Egypt exploration drilling campaign update (SDX 55%
working interest)
-- The Sobhi well is currently being tied in via a 5.8 kilometre
connection to the Ibn Yunus-1X location where an existing flow-line
connects down to the South Disouq CPF, at an estimated cost of
US$3.5 million. The discovery will potentially only require one
further development well to be drilled, which will not be necessary
for another two to three years. SDX drilled the Sobhi well at a
100% working interest and the total cost of the well, including the
cost to complete and test, was US$4.0 million. Management expects
the Sobhi well to commence production in Q1 2021.
-- The Company's partner has confirmed that, due to the premium
that would be payable if it exercised its back-in rights under the
Joint Operating Agreement, it will not participate in the
development of the Sobhi discovery.
-- Following the success of SD-12X and further review of the 3D
seismic, management has now identified 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 estimate of c.96bcf is primarily
attributable to the identification of the Hanut prospect which the
Company 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 H1 2022. The
campaign will commence with the drilling of the IY-2X development
well in the Ibn Yunus field to accelerate production and cash
flows. The Hanut prospect will be drilled immediately afterwards,
targeting 139 bcf, with the Mohsen (26 bcf) and Warda (14bcf) wells
to be drilled in 2022. The Company's 45% partner will participate
in the IY-2X well and has still to confirm whether they will
participate in the other proposed wells.
-- 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 Working Interval Concession Comment Unrisked Chance
Name Interest Detail Mean of Success
% (bcf) (%)
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 2 Yr(2)
KES/Abu exploration
Ibn Newton/Newton 55-100(1) Madi extension Dual Target 16 40-45
---------- --------- -------------------- --------------- --------- ------------
Up to 25 Yr
Shikabala Development
prospects KES/ Lease to 31 Single Target
(two wells) 100 Qawasim August 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) Two-year extension period commences on date of Parliamentary
approval
West Gharib Egypt exploration drilling campaign update (SDX 50%
working interest)
-- During Q1 2020, the Rabul-3 development well in the West
Gharib Concession in Egypt was drilled to a total depth of 1,710
metres and encountered approximately 39 metres of net heavy oil pay
across the Yusr and Bakr formations. The Yusr and Bakr formations
are of excellent reservoir quality with an average porosity of 21%.
The well was completed as a producer in mid-April 2020, with both
formations being perforated. After connection to the CPF at West
Gharib and clean-up, the well has produced at the expected average
stabilised rate of approximately 300 bbl/d.
2020 Capex Guidance
-- 2020 capex guidance is maintained at US$26.2 million, as follows:
o US$10.7 million at South Disouq which is for the drilling of
two exploration wells (SD-6X: SDX 55% interest and SD-12X: SDX 100%
interest), the tie in costs for the successful SD-12X well to the
CPF (SDX 100% interest), well workovers, CPF equipment spares and a
deposit on the booster compressor planned for South Disouq in 2021.
Capex incurred as at 30 September 2020 represents the dry-hole cost
of the non-commercial SD-6X well, the costs of drilling, completing
and testing the SD-12X discovery well (including decommissioning
provision and development bonus), the SD-12X tie in project, and
equipment spares for the CPF;
o US$2.0 million for up to three appraisal/development wells in
West Gharib; and
o US$13.5 million covering the Morocco drilling campaign, which
completed in March, and new well connections and customer
infrastructure which are ongoing.
Asset Guidance - Actual - 9
12 months ended months ended
31 December 30 September
2020 2020
South Disouq - US$10.7 million US$8.0 million(1)
WI 55%
----------------- -------------------
West Gharib - WI US$2.0 million US$0.5 million
50%
----------------- -------------------
Morocco - WI 75% US$13.5 million US$13.2 million(2)
----------------- -------------------
Total US$26.2 million US$21.7 million
----------------- -------------------
(1) Includes US$0.2 million of non-cash decommissioning
provisions
(2) Includes US$0.5 million of non-cash decommissioning
provisions
Nine months to 30 September 2020 Financial Update
-- Netback was US$26.6 million, 41% higher than the Netback of
US$18.9 million for the nine months to 30 September 2019, driven
by:
o Net revenue increase of US$10.1 million due to:
o US$15.7 million of South Disouq revenue, following production
start up in Q4 2019 offset by;
o US$5.6 million lower revenue at West Gharib due to lower
realised service fees (2020: US$31.25/bbl, 2019: US$49.95/bbl) and
lower production (2020: 639 bbl/d, 2019: 814 bbl/d); and
o US$0.2 million lower revenue in Morocco due to decreased
production caused by shutdowns required by COVID-19 restrictions
(2020: 735 boe/d, 2019: 772 boe/d)
o Operating costs increasing by US$2.6 million from prior period
due to the commencement of production at South Disouq and South
Ramadan, partly offset by lower costs at each of the other
assets.
-- EBITDAX was US$23.9 million, US$8.8 million (58%) higher than
EBITDAX of US$15.1 million for the nine months to 30 September
2019. This increase is due to higher Netback and lower G&A
expenses due to the absence in 2020 of transaction costs associated
with the Company's redomicile to the UK in 2019 and redundancy
costs for two senior employees who left in Q2 2019.
-- The main components of SDX's comprehensive loss of US$2.2
million for the nine months ended 30 September 2020 are:
o US$26.6 million Netback;
o US$5.5 million of E&E expense, of which:
-- US$2.3 million represents the write-off of the sub-commercial
SD-6X well in South Disouq, including associated 3D seismic
costs;
-- US$2.2 million is the write off of the sub-commercial SAH-5
well in Morocco, including associated 3D seismic costs; and
-- US$1.0 million relates to ongoing new venture activity
(predominantly internal management time).
o US$17.8 million of DD&A expense reflects increased charges
due to South Disouq start up in Q4 2019, partly offset by a lower
charge in Morocco following 2P reserve additions from Q4 2019/Q1
2020 drilling;
o US$2.6 million of ongoing G&A expense, and US$0.1 million
of transaction costs associated with the disposal of NW Gemsa;
o US$4.0 million of Egyptian corporation tax predominantly for
South Disouq; and
o US$1.9 million profit from discontinued operations
representing the result from the NW Gemsa field up to 31 March 2020
prior to its sale, a profit after tax of US$1.1 million, and a
US$0.8 million gain on sale.
Operating cash flow (before capex, excluding discontinued
operations)
-- Operating cash flow (before capex, excluding discontinued
operations) of US$14.7 million, higher than the same period in 2019
of US$7.7 million primarily due to the EBITDAX drivers discussed
above, offset by an increase in accounts receivable during the
period and cash spent on inventory, the majority of which will be
consumed in the next Morocco drilling campaign.
CAPEX
-- US$21.8 million of capital expenditure has been invested into
the business during the nine months to 30 September 2020:
o US$13.0 million (including US$0.5 million of decommissioning
provisions) for the Moroccan drilling campaign and well
tie-ins;
o US$6.3 million for the drilling of the SD-6X (SDX: 55%
interest) and SD-12X (SDX: 100% interest) wells in South Disouq
(including US$0.2 million of decommissioning provisions and a
US$0.3 million development lease bonus for the SD-12X
discovery);
o US$0.9 million for the SD-12X tie in project;
o US$0.8 million for additional work and insurance spares at the
South Disouq CPF;
o US$0.5 million for drilling/workovers in West Gharib;
o US$0.2 million for Morocco facilities and customer
connections; and
o US$0.1 million for other assets.
Liquidity update
-- Closing cash as at 30 September 2020 was US$9.9 million with
the US$7.5 million EBRD credit facility remaining undrawn at that
time. Post period end, the facility amortised down to US$2.5
million of availability, however in the coming days, the Company is
expecting to sign a new facility agreement with EBRD, with a 5 year
tenor, which will re-establish US$10.0 million of availability
after satisfaction of normal CPs. In the meantime, the existing
facility will remain available.
Corporate update
-- The Company is well-placed to weather the current
macroeconomic uncertainties and continues to screen a number of
business development opportunities.
-- In the period SDX announced the appointment of Catherine
Stalker as independent non-executive Director effective 6 February
2020.
-- Q3 2020 saw the sale of the Group's non-core North West Gemsa
asset in Egypt with the net US$1.6 million proceeds exceeding
management's expectations as well as showing the ongoing focus and
commitment to capital discipline and careful management of the
Group's portfolio whilst also providing additional cash to further
strengthen its balance sheet.
-- Post period end, the Company agreed to the disposal of its
non-core 12.75% working interest in the South Ramadan concession,
located offshore in the Gulf of Suez, Egypt. The purchaser,
International Oil Services, a private Egyptian oil and gas company,
has already paid the US$0.5 million consideration for the Company's
interest, which is in excess of management's internal valuation of
the asset.
KEY FINANCIAL & OPERATING HIGHLIGHTS
Nine months ended
30 September
-------------------------------- --- -----------------------------
2020 2019
$000s except per unit amounts (unaudited) (unaudited)
-------------------------------- ---- ---------------
FINANCIAL
-------------------------------- ---- ---------------
Gross revenues 42,291 24,152
Royalties (8,479) (496)
Net Revenues 33,812 23,656
Operating costs (7,251) (4,714)
Netback (1) 26,561 18,942
EBITDAX (1) 23,862 15,125
Total comprehensive loss (2,207) (23)
Net loss per share - basic $(0.011) $(0.000)
Cash, end of period 9,866 12,589
Capital expenditures 21,762 26,545
Total assets 127,611 139,542
Shareholders' equity 96,452 115,806
Common shares outstanding
(000's) 205,378 204,723
OPERATIONAL
-------------
NW Gemsa sales (bbl/d) 511 1,915
West Gharib production service
fee (bbl/d) 639 814
South Disouq gas sales (boe/d) 4,453 -
Morocco gas sales (boe/d) 735 772
Other products sales (boe/d) 308 -
-------------------------------- ---- ------------- ---------------
Total sales volumes (boe/d) 6,646 3,501
-------------------------------------- ------------- ---------------
Realised West Gharib service
fee (US$/bbl) $31.25 $49.95
Realised South Disouq gas
price (US$/Mcf) $2.85 -
Realised Morocco gas price
(US$/Mcf) $10.62 $10.32
Royalties ($/boe) $5.04 $1.15
Operating costs ($/boe) $4.31 $10.89
Netback ($/boe) (1) $15.80 $43.74
(1) Refer to the "Non-IFRS Measures" section of this release
below for details of Netback and EBITDAX.
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
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.
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)
Jason Grossman
Ashton Clanfield
Fred Walsh
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
Capital Markets Day call details
Date: 19 November 2020
Time: 3:00pm GMT
To register and login for the event, please use this link:
https://webcasting.brrmedia.co.uk/broadcast/5fad284cbe1fd642a3ef0f4d
The presentation will be made available 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
------------------------------
"2P" proved plus probable reserves
------------------------------
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 sufficiency of reserves
to fulfill existing customer contracts, 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.
Non-IFRS Measures
This news release contains the terms "Netback," and "EBITDAX"
which are not recognized measures under IFRS and may not be
comparable to similar measures presented by other issuers. The
Company uses these measures to help evaluate its performance.
Netback is a non-IFRS measure that represents sales net of all
operating expenses and government royalties. Management believes
that Netback is a useful supplemental measure to analyze operating
performance and provide an indication of the results generated by
the Company's principal business activities prior to the
consideration of other income and expenses. Management considers
Netback an important measure as it demonstrates the Company's
profitability relative to current commodity prices. Netback may not
be comparable to similar measures used by other companies.
EBITDAX is a non-IFRS measure that represents earnings before
interest, tax, depreciation, amortization, exploration expense and
impairment. EBITDAX is calculated by taking operating income/(loss)
and adjusted for the add-back of depreciation and amortization,
exploration expense and impairment of property, plant, and
equipment (if applicable). EBITDAX is presented in order for the
users to understand the cash profitability of the Company, which
excludes the impact of costs attributable to exploration activity,
which tend to be one-off in nature, and the non-cash costs relating
to depreciation, amortization and impairments. EBITDAX may not be
comparable to similar measures used by other companies.
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.
This information is provided by RNS, the news service of the
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END
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