TIDMSDX
RNS Number : 7897S
SDX Energy PLC
19 March 2021
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 March 2021
SDX ENERGY PLC ("SDX", the "Company" or the "Group")
ANNOUNCES FULL YEAR 2020 FINANCIAL AND OPERATING RESULTS
SDX Energy Plc (AIM: SDX), the MENA-focused oil and gas company,
is pleased to announce its audited financial and operating results
for the twelve months ended 31 December 2020. All monetary values
are expressed in United States dollars net to the Company unless
otherwise stated.
SDX management will be hosting a conference call for analysts
today at 3:00pm UK time, details of which can be found in the
release below. As previously announced, management is also hosting
a conference call for retail investors on Monday 22(nd) March. For
details of this call, please contact Camarco at
sdx@camarco.co.uk
Mark Reid, CEO of SDX, commented:
"After what has been a very disruptive period for both
businesses and people, I am extremely pleased to announce a set of
results featuring record production, a strong balance sheet and
successful drilling results.
Operationally, 2020 was a strong year for the Group and although
the COVID-19 pandemic contributed to a low oil price environment,
SDX's high fixed-price gas assets in both Egypt and Morocco
demonstrated the cash-generative resilience that exists within our
portfolio. While Morocco production saw demand fluctuations early
in the period, we are now back to pre-lockdown levels of production
with 2021 production expected to be 8-12% higher than in 2020.
Our exploration efforts in the period were also positive in both
Egypt and Morocco, with our largest discovery, the SD-12X well in
South Disouq, having been brought on stream before the end of the
year. As well as adding reserves through the drill bit, the Group
also continued to manage its portfolio with the sale of non-core
assets in North West Gemsa and South Ramadan, adding further to the
Group's cash and reducing its associated capex.
With a 39% increase in EBITDAX from continuing operations to
US$32.9 million, our strong focus on capital discipline and our
balance sheet stewardship, we have ended the year with a healthy
cash balance and clarity over our work programme for the next two
years, funded from our cash position. This work programme includes
a transformational prospect with the Hanut well having the
potential to significantly increase Company reserves. Furthermore,
the recently approved ten-year extension of our West Gharib oil
concession increases our share of reserves in the asset by 60% year
on year and 119% taking account of 2020 production. With a
breakeven Brent price of approximately US$20/bbl this is an
extremely positive development given current oil prices. We have
also made excellent progress with various ESG initiatives and I am
particularly proud to announce that our carbon intensity in 2020
was only 1.8kgCO(2e) /boe for our operated assets, one of the best
performances in the industry.
Finally, I would like to thank all of our team for their
tireless work rate and commitment in what was tough period for all
as we tackled challenges seldom seen before. The outlook for SDX is
extremely bright and we look forward to delivering on our goals for
the coming period and enhancing value for all stakeholders in the
Company."
Year to 31 December 2020 Operations Highlights
-- Average entitlement production of 6,397 boe/d, an increase of
57% year on year due to strong production levels mainly from South
Disouq, at 49.5 MMscfe/d equating to 4,532 boe/d net to SDX.
-- 2020 production from core assets either exceeded or was at
the top end of market guidance, despite COVID-19 interruptions in
Morocco. Capex was below guidance, primarily due to drilling at
West Gharib being deferred due to the lower oil price environment
in 2020.
-- 2021 guidance for production is 5,620 - 5,920 boe/d and for
capex is US$25.0-US$26.5 million.
-- The Company's operated assets recorded a carbon intensity of
1.8kg CO(2e) /boe in 2020 which is one of the lowest rates in the
industry.
-- The South Disouq two-well drilling campaign finished with a
discovery at, SD-12X (100% working interest to SDX). First gas was
achieved in December 2020, 5-6 weeks ahead of schedule.
-- Following further review of the 3D seismic after the SD-12X discovery, c.233bcf of close to infrastructure, mean unrisked recoverable volumes, located in productive horizons have been high-graded to drill-ready prospects.
-- Subject to receipt of final Ministerial and Parliamentary
approval for a two-year exploration concession extension, the
Company plans to drill the Hanut prospect targeting 139bcf in Q3
2021.
-- Hanut will be part of a two-well campaign with IY-2X well, a
development well in the eastern part of the Ibn Yunus field,
seeking to bring forward production and cash flow. The Company's
partner has confirmed that it will participate in both wells.
-- During the year, the Group sold its two non-core assets,
North West Gemsa and South Ramadan in Egypt for US$2.1 million, a
sum which exceeded management's expectation.
-- Post-period end, SDX obtained approval for a ten-year
extension to the West Gharib Production Services Agreement
increasing audited(1) 2P reserves in this core oil asset as at 31
December 2020, by 60% year on year, or 119% taking account of 2020
production, to 3.52 million barrels.
-- The Moroccan drilling campaign in 2019/20 resulted in seven
discoveries from nine wells, with the tenth well, LMS-2, completed
and now expected to be tested as part of the 2021 drilling
campaign.
-- Further analysis of the LMS-2 well results has revealed that
Top Nappe structures, similar to LMS-2, are present throughout the
Company's acreage. Subject to a successful flow test of LMS-2, the
intention is to target the Top Nappe as part of the planned 2021
Moroccan drilling campaign, to commence in H1 2021.
-- Gas consumption in Morocco has returned to March 2020
pre-COVID-19 levels. In December 2020 an existing customer's second
factory started up, contributing to higher guidance for FY2021.
-- As at 31 December 2020, the Company's working interest share
of audited(1) 2P reserves was 11.1 mmboe and audited 2C contingent
resources was 0.9 mmboe. The 0.9 mmboe of 2C resources relates to
the Meseda and Rabul producing assets in its West Gharib concession
in Egypt and will be converted to 2P reserves upon approval of a
development plan.
(1) The Company's 2P reserves and 2C resources estimates have
been audited in accordance with the COGE Handbook & PRMS by
Gaffney, Cline & Associates, an independent qualified reserves
evaluator and auditor.
Twelve months to 31 December 2020 Financial Highlights
The table below reflects the results of the Company for the
years ended 31 December 2020 and 2019. The North West Gemsa and
South Ramadan concessions, which were sold in Q3 and Q4 2020
respectively, are classified as discontinued operations (as
required by IFRS). All revenues, costs and taxation from these
assets 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 or South
Ramadan.
Twelve months
ended 31 December
US$ million except per unit 2020 2019
amounts
---------- ---------
Net revenues 46.1 34.8
---------- ---------
Netback(1) 36.5 28.2
---------- ---------
Net realised average oil service
fees - US$/barrel 31.96 49.61
---------- ---------
Net realised average Morocco
gas price - US$/Mcf 10.80 10.39
---------- ---------
Net realised South Disouq gas
price - US$/Mcf 2.85 2.85
---------- ---------
Netback - US$/boe 16.73 34.75
---------- ---------
EBITDAX(1) (2) 32.9 23.6
---------- ---------
Exploration & evaluation expense(3) (5.8) (11.4)
---------- ---------
Impairment expense - (8.3)
---------- ---------
Depletion, depreciation, and
amortisation (25.2) (18.7)
---------- ---------
Profit/(loss) from discontinued
operations 1.8 (0.4)
---------- ---------
Total comprehensive loss (2.1) (18.2)
---------- ---------
Capital expenditure 24.7 43.0
---------- ---------
Net cash generated from operating
activities(4) 21.3 12.1
---------- ---------
Cash and cash equivalents 10.1 11.1
---------- ---------
(1) Refer to the "Non-IFRS Measures" section of this release
below for details of Netback and EBITDAX.
(2) EBITDAX for twelve months ended 31 December 2020 and 2019
includes US$5.1 million and US$0.1 million respectively of non-cash
revenue relating to the grossing up of Egyptian corporate tax on
the South Disouq PSC which is paid by the Egyptian State on behalf
of the Company.
(3) For the twelve months ended 31 December 2020 and 2019 US$4.5
million and US$10.3 million respectively of non-cash Exploration
& Evaluation ("E&E") write offs in total are included
within this line item.
(4) Excludes discontinued operations.
-- Netback of US$36.5 million, 29% higher than the same period
in 2019, was driven by a full year of production from South Disouq.
Morocco Netback was higher reflecting a strong recovery from
COVID-19 shutdowns, however West Gharib experienced lower
production due to increased water cut and lower oil service fee
realisations due to lower oil prices in 2020. Operating expenses
were US$2.9 million higher predominantly due to a full year of
South Disouq operations, partly offset by cost savings and lower
workover activity at West Gharib. The lower per unit Netback of
US$16.73/boe in 2020 (2019: US$34.75/boe) results from the
increased contribution of South Disouq in 2020 which has high
volume, lower Netback production, versus 2019 which only included
South Disouq from the start of production in November and therefore
reflected a higher proportion of volumes from Morocco, which
achieves high Netbacks.
-- EBITDAX of US$32.9 million was 39% higher than the same
period in 2019 of US$23.6 million due to higher Netback, lower
recurring G&A expenses and lower transaction costs in 2020,
partly offset by lower profitability from the Company's investment
in the joint venture that operates the West Gharib asset due to the
lower oil price environment.
-- Depletion, depreciation and amortisation ("DD&A") charge
of US$25.2 million was higher than the US$18.7 million for the same
period in 2019 due to a full year of South Disouq DD&A charge,
partly offset by a reduced charge in Morocco following 2P reserves
additions from the drilling campaign in Q4 2019/Q1 2020.
-- 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. In 2019 the US$5.1 million South Ramadan E&E
asset was written off, as was the 2018/19 South Disouq 3D seismic
survey (US$3.7 million) and the CGD-15 dry hole in Morocco (US$1.5
million).
-- Operating cash flow (before capex, excluding discontinued
operations) of US$21.3 million, was higher than the same period in
2019, US$12.1 million, primarily due to the EBITDAX drivers
discussed above, offset by an increase in accounts receivable from
continuing operations mainly due to increased revenues from South
Disouq and Morocco during the period, and higher inventory
spend.
-- Capex of US$24.7 million, reflects:
o US$13.3 million (including US$0.5 million of decommissioning
provisions) for the Moroccan drilling campaign and well
tie-ins;
o US$7.3 million for the drilling, completion, testing and
tie-in of the SD-12X well in South Disouq (SDX: 100% working
interest), including a US$0.3 million development lease bonus and a
US$0.2 million decommissioning provision;
o US$1.2 million for the dry-hole drilling cost of the SD-6X
(SDX: 55% working interest) well in South Disouq;
o US$1.5 million for additional work and insurance spares at the
South Disouq Central Processing Facility ("CPF");
o US$0.4 million for drilling/workovers in West Gharib;
o US$0.9 million for Morocco facilities and customer
connections; and
o US$0.1 million for other assets.
o The key difference between the US$24.7 million spend in 2020
and the US$43.0 million in 2019 is the fact that the South Disouq
CPF, the flowlines and main export line were constructed in 2019,
at a cost US$19.4 million (including a US$1.0 million
decommissioning provision).
-- Liquidity: Closing cash as at 31 December 2020 was US$10.1
million with the US$2.5 million EBRD credit facility remaining
undrawn. The Company has agreed a new five-year, US$10 million
facility with EBRD which will be available for drawing upon
satisfaction of standard conditions precedent.
-- Together with cash generated from operations, management
believes the Company is fully funded for all planned activities in
2021 - 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 31 December 2020 had returned to their
pre-closure consumption rates. Egyptian production remained
unaffected by COVID-19 throughout the period and at present. The
Company continues to follow applicable government guidance in each
of its territories.
2021 Guidance
-- 2021 production guidance of 5,620 - 5,920 boe/d is 1-6% lower
than 2020 production, excluding the assets divested, predominantly
due to scheduled maintenance at the Group's CPF at South Disouq. An
analysis of 2021 production guidance by asset is as follows:
Gross production SDX entitlement SDX entitlement
production production
boe/d boe/d
Asset Guidance - 12 Actual - 12 months Guidance Actual
months ended ended 31 December 12 months 12 months
31 December 2020(1) ended 31 ended
2021 December 31 December
2021 2020
------------------- -------------------- ---------------- ----------------
South Disouq -
WI 55% & 100% 4,300 -
SD-12X 44 - 46 MMscfe/d 49.5 MMscfe/d 4,500 4,532
------------------- -------------------- ---------------- ----------------
West Gharib - 2,350 - 2,650
WI 50% bbl/d 3,285 bbl/d 446- 505 626
------------------- -------------------- ---------------- ----------------
Morocco - WI 75% 7.0 - 7.3 MMscf/d 6.5 MMscf/d 874 - 915 812
------------------- -------------------- ---------------- ----------------
5,620 -
Total 5,920 5,970
---------------- ----------------
o South Disouq : Production guidance for 2021 reflects planned
2-3% Central Processing Facility ("CPF") downtime due to planned
maintenance, the installation of an inlet compressor and several
well workovers, none of which occurred in 2020. Where possible,
these activities are expected to be synchronised to minimise their
impact. The Company's share of gross production will increase due
to its 100% working interest in the SD-12X well, which started up
ahead of schedule in December 2020.
o West Gharib: Production is expected to decline naturally
during H1'21 until the planned three to four well campaign
commences. Thereafter, the production decline is expected to be
arrested, with further development wells planned for 2022 and 2023
with a view to growing production to approximately 3,000 bbl/d.
o Morocco: Production guidance is 8-12% higher than 2020
production and reflects a sustained return to normal levels of
consumption across the customer base, following COVID shutdowns
which impacted 2020 production, together with a full year's
contribution from an existing customer's second factory, which came
online in December 2020.
o COVID-19: The 2021 production guidance presented assumes no
significant production curtailments due to COVID-19. Should there
be COVID-19 related disruptions, then production guidance may be
revised.
2021 Capex Guidance
-- 2021 capex guidance range of US$25.0 - 26.5 million
predominantly relates to one exploration and one development well
in South Disouq together with workovers and the installation of an
inlet compressor. Up to five new wells and workovers are planned in
Morocco and up to four new wells and facilities upgrades at West
Gharib.
Asset Guidance - 12 Actual - 12
months ended months ended
31 December 31 December
2021 2020
South Disouq US$7.0 - 7.5 US$10.1 million(1)
- WI 55% million
--------------- -------------------
West Gharib - US$2.5 - 3.0 US$0.4 million
WI 50% million
--------------- -------------------
Morocco - WI US$15.5 - 16.0 US$14.2 million(2)
75% million
--------------- -------------------
Total US$25.0 - 26.5 US$24.7 million
million
--------------- -------------------
(1) Includes US$0.2 million of non-cash decommissioning
provisions
(2) Includes US$0.5 million of non-cash decommissioning
provisions
-- The anticipated timings of planned key capex activities are outlined below:
Asset Activity 2021 Timing
South Disouq SD-4X workover Q1
----------------------------- ------------
SD-1X workover Q2
----------------------------- ------------
Compressor fabrication & Q2-Q3
installation
----------------------------- ------------
Ibn Yunus-2X development Q2-Q3
well (incl. tie in)
----------------------------- ------------
Hanut-1X exploration well Q3
----------------------------- ------------
SD-3X workover Q4
----------------------------- ------------
Morocco Well workovers Q1 & Q4
----------------------------- ------------
Drilling campaign- first Q2
two wells
----------------------------- ------------
LMS-2 well test Q3
----------------------------- ------------
Drilling campaign- remaining Q3-Q4
wells
----------------------------- ------------
West Gharib Three/four development wells Q2-Q3
----------------------------- ------------
Water injection well and Q2-Q3
facilities upgrades
----------------------------- ------------
o South Disouq : One development well, Ibn Yunus-2X, and one
exploration well, Hanut-1X, will be drilled consecutively,
commencing in Q2 2021. The IY-2X well will access the eastern
compartment of the Ibn Yunus field and is expected to be completed
and tied back rapidly once drilled. The Hanut-1X well is targeting
unrisked mean recoverable volumes of 139bcf with a 33% chance of
success. The Company's partner has confirmed that it will
participate in both wells. An inlet compressor will be installed at
the CPF site to maximise recovery from the fields, and several well
workovers are also planned. Once the exploration concession
extension that includes the Hanut and Mohsen prospects has been
ratified by Parliament, the Company will pay its share of signature
and training bonuses.
o West Gharib: At least three infill development wells will be
drilled with a fourth contingent upon field performance and the
macroeconomic environment. One water injection well will be
drilled, and additional facilities to support this project will be
installed. Given the low oil price environment in 2020, only one
development well was drilled.
o Morocco: Four or five wells will be drilled in two campaigns
in Q2 and Q4 2021. As the drilling rig is stacked in the Company's
yard in Morocco, there will be no significant mobilisation cost and
in addition splitting the campaign into two allocates the capital
investment over approximately eight months which allows the cost of
these wells to be comfortably covered by cash generated in that
period. Four wells will target shallow biogenic gas that can be
tied into the Company's infrastructure quickly and at low cost. In
addition, the tenth well from the previous campaign, LMS-2, which
penetrated a Top Nappe target will be tested. Should this test be
successful, one of the 2021 campaign wells may be deepened to test
the Top Nappe prospectivity in the Company's core production area.
On the assumption that the rig continues to be available after the
drilling of the four firm wells, a fifth contingent well may target
additional close to infrastructure reserves. A workover programme
of up to seven wells will also be conducted, including
re-perforation and sliding sleeve operations to exploit behind-pipe
reserves and maximise production and recovery from the existing
well stock.
2020 ESG metrics
-- During 2020 SDX has developed its systems and processes to
enable it to externally report on key ESG metrics at its operated
assets.
-- The Company's operated assets recorded a carbon intensity of
1.8kg CO(2e) /boe in 2020, which is one of the lowest rates in the
industry
-- Scope 1 greenhouse gas emissions at operated assets were
6,699 tons of CO(2e) . Scope 3 greenhouse gas emissions in Morocco
were 113,000 tons of CO(2e) , which is approximately 57,000 tons of
CO(2e) less than using alternative heavy fuel oil.
-- There was one minor Lost Time Injury ("LTI") at South Disouq
during 2020 where a contractor was injured but returned to work
after three days. SDX immediately conducted an incident report and
lessons learned exercise. The safety management system was modified
to ensure that similar incidents should not occur in future. This
LTI was the first to be recorded by SDX Energy.
-- No produced water was discharged into the environment in
Morocco (100% contained and evaporated) or at South Disouq (100%
recycled).
-- There were no hydrocarbon spills at operated assets.
-- Whist social projects were severely impacted by COVID-19
restrictions in 2020, the Company is working on a number of
initiatives to be launched in 2021 as soon as this can be done
safely.
-- The Company continues to adopt high standards of Governance
through its adherence to the QCA Code on Corporate Governance.
Outlook
-- Management believes that 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 2021
and beyond as approximately 90% of the Company's cash flows are
expected to be generated from fixed-price gas businesses.
-- The current strong oil price and outlook means that the Group
also plans to capitalise on its recent production service agreement
extension at West Gharib.
-- Anticipated 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.
Detailed Operations Update
Twelve months to 31 December 2020 Production
-- Twelve months to 31 December 2020 actual entitlement
production of 6,397 boe/d, an increase of 57% from the same period
in 2019, with South Disouq and Morocco exceeding guidance. An
analysis of production by asset is as follows:
Gross production SDX entitlement production
Asset Actual - 12 Guidance Guidance Actual Actual
months ended - 12 months - 12 months 12 months 12 months
31 December ended 31 December ended 31 ended 31 ended 31
2020 2020 December December December
Gross Gross 2020 2020 2019
Entitlement Entitlement Entitlement
-------------------- -------------------- ------------- ------------- -------------
Core assets
-------------------- -------------------- ------------- ------------- -------------
South Disouq - WI 4,300 -
55% 49.5 MMscfe/d 47 - 49 MMscfe/d 4,460 4,532 629
-------------------- -------------------- ------------- ------------- -------------
West Gharib - WI 3,200 - 3,300
50% 3,285 bbl/d bbl/d 610 - 630 626 795
-------------------- -------------------- ------------- ------------- -------------
5.3 - 6.0
Morocco - WI 75% 6.5 MMscf/d MMscf/d 663 - 750 812 802
-------------------- -------------------- ------------- ------------- -------------
Non-core assets
-------------------- -------------------- ------------- ------------- -------------
N/A - now
NW Gemsa - WI 50% N/A - now disposed disposed 385 382 1,836
-------------------- -------------------- ------------- ------------- -------------
South Ramadan - N/A - now
WI 12.75 % N/A - now disposed disposed 42 45 -
-------------------- -------------------- ------------- ------------- -------------
6,000 -
Total 6,267 6,397 4,062
------------- ------------- -------------
o South Disouq (W.I. 55%) : The South Disouq asset exceeded
expectations during the twelve months to 31 December 2020, with all
four wells flowing ahead of expected rates for the year and the CPF
achieving higher than planned levels of uptime. During the second
half of the year, the SD-4X and SD-1X wells began to produce
increased levels of water and sand, resulting in reduced
production. The SD-4X was successfully worked over in Q1 2021 and
was put back on production, with SD-1X expected to be worked over
later in the quarter.
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.
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. Upon the recommencement of
production, these customers gradually increased their consumption
back to pre-closure levels. An existing customer's second factory
came online in December 2020.
o NW Gemsa (W.I. 50%): The Company sold its 50% working interest
in this non-core asset in July 2020, with an effective date of 1
April 2020. Gross production to 31 March 2020 was 3,056 boe/d
(1,528 boe/d net to SDX), which equates to equivalent actual
entitlement production to the Company of 382 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. The asset which was non-core was sold with an effective date
of 1 November 2020, with the Company's equivalent actual
entitlement production of 45 bbl/d for the year.
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 to preserve capital.
-- 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 deeper than the Company's core production and
development area and the areas previously targeted in Lalla
Mimouna. Subject to a successful flow test of LMS-2, the 2021
drilling campaign may target a Top Nappe prospect within the core
producing area.
-- 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)
-- In Q4 2020, the SD-12X well (SDX 100% working interest) was
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,
achieving first gas in December, at an estimated tie in cost of
US$3.1 million, US$0.4 million below initial estimates. The
discovery will potentially only require one further development
well to be drilled, which can be undertaken when necessary.
-- 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 drill-ready prospects.
-- 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
commence drilling in June. The campaign will kick off 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 expected to be drilled in
2022/23. 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 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 % dependent on Partner's decision to
participate in the extension. The Company's partner has confirmed
its participation in the Hanut-1X well.
(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 produced at the expected average
stabilised rate of approximately 300 bbl/d.
Twelve months to 31 December 2020 Financial Update
-- Netback was US$36.5 million, 29% higher than the Netback of
US$28.2 million for the twelve months to 31 December 2019, driven
by:
o Net revenue increase of US$11.3 million due to:
o US$17.3 million higher South Disouq revenue, with a full
year's production following start up in Q4 2019; and
o US$1.0 million higher revenue in Morocco due to increased
production following strong demand rebound following COVID-19
shutdowns (2020: 812 boe/d, 2019: 802 boe/d) and higher prices due
to the strengthening of the Moroccan dirham and contract mix;
offset by; and
o US$7.1 million lower revenue at West Gharib due to lower
realised service fees (2020: US$31.96/bbl, 2019: US$49.61/bbl) and
lower production (2020: 626 bbl/d, 2019: 795 bbl/d).
o Operating costs increasing by US$2.9 million from prior period
due to the commencement of production at South Disouq, partly
offset by lower costs at West Gharib due to cost savings and lower
workover activities.
-- EBITDAX was US$32.9 million, US$9.3 million (39%) higher than
EBITDAX of US$23.6 million for the twelve months to 31 December
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, partly offset
by lower profitability from the Company's investment in the joint
venture that operates the West Gharib asset.
-- The main components of SDX's comprehensive loss of US$2.1
million for the twelve months ended 31 December 2020 are:
o US$36.5 million Netback;
o US$5.8 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$1.3 million relates to ongoing new venture activity
(predominantly internal management time);
o US$25.2 million of DD&A expense reflects increased charges
due to a full year of South Disouq production, partly offset by a
lower charge in Morocco following 2P reserve additions from Q4
2019/Q1 2020 drilling;
o US$4.0 million of ongoing G&A expense, and US$0.2 million
of transaction costs associated with the disposals of NW Gemsa and
South Ramadan;
o US$5.3 million of Egyptian corporation tax predominantly for
South Disouq; and
o US$1.8 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. The South Ramadan asset contributed a
net loss of US$0.1 million.
Operating cash flow (before capex, excluding discontinued
operations)
-- Operating cash flow (before capex, excluding discontinued
operations) of US$21.3 million, higher than the same period in 2019
of US$12.1 million primarily due to the EBITDAX drivers discussed
above, offset by an increase in accounts receivable from continuing
operations mainly due to increased revenues from South Disouq and
Morocco during the period and cash spent on inventory, the majority
of which will be consumed in the next Morocco drilling
campaign.
KEY FINANCIAL & OPERATING HIGHLIGHTS
Twelve months
ended
31 December
-------------------------------- ------------------- ---------
$000s except per unit amounts 2020 2019
-------------------------------- ---- ---------
FINANCIAL
-------------------------------- ---- ---------
Net Revenues 46,068 34,822
Operating costs (9,535) (6,595)
Netback (1) 36,533 28,227
EBITDAX (1) 32,874 23,550
Total comprehensive loss (2,058) (18,186)
Net loss per share - basic $(0.010) $(0.089)
Cash, end of period 10,056 11,054
Capital expenditures 24,733 42,989
Total assets 124,603 133,018
Shareholders' equity 96,342 98,031
Common shares outstanding
(000's) 205,378 204,723
OPERATIONAL
--------------
NW Gemsa sales (bbl/d) 382 1,836
West Gharib production service
fee (bbl/d) 626 795
South Disouq gas sales (boe/d) 4,286 599
Morocco gas sales (boe/d) 812 802
Other products sales (boe/d) 291 30
-------------------------------------- -------------- ---------
Total sales volumes (boe/d) 6,397 4,062
-------------------------------------- -------------- ---------
Realised West Gharib service
fee (US$/bbl) $31.96 $49.61
Realised South Disouq gas
price (US$/Mcf) $2.85 $2.85
Realised Morocco gas price
(US$/Mcf) $10.80 $10.39
Royalties ($/boe) $4.94 $2.71
Operating costs ($/boe) $4.35 $8.12
Netback ($/boe) (1) $16.73 $34.75
(1) Refer to the "Non-IFRS Measures" section of this release
below for details of Netback and EBITDAX.
Consolidated Balance Sheet
(US$'000s) As at 31 As at 31
December December
2020 2019
-------------------------------- ------------------ -------------------
Assets
Cash and cash equivalents 10,056 11,054
Trade and other receivables 18,608 21,774
Inventory 8,414 7,972
--------------------------------- ------------------ -------------------
Current assets 37,078 40,800
Investments 3,790 3,916
Property, plant and equipment 57,880 67,895
Exploration and evaluation
assets 24,455 18,720
Right-of-use assets 1,400 1,687
--------------------------------- -------------------
Non-current assets 87,525 92,218
Total assets 124,603 133,018
--------------------------------- -------------------
Liabilities
Trade and other payables 20,120 25,982
Decommissioning liability 327 317
Current income taxes 241 1,484
Lease liability 461 506
--------------------------------- ------------------ -------------------
Current liabilities 21,149 28,289
Decommissioning liability 5,862 5,287
Deferred income taxes 290 290
Lease liability 960 1,121
--------------------------------- -------------------
Non-current liabilities 7,112 6,698
Total liabilities 28,261 34,987
--------------------------------- -------------------
Equity
Share capital 2,601 2,593
Share premium 130 -
Share-based payment reserve 7,269 7,038
Accumulated other comprehensive
loss (917) (917)
Merger reserve 37,034 37,034
Retained earnings 50,225 52,283
Total equity 96,342 98,031
--------------------------------- -------------------
Equity and liabilities 124,603 133,018
--------------------------------- -------------------
Consolidated Statement of Comprehensive Income
Year ended 31 December
(US$'000s) 2020 2019
----------------------------------------- ----------------------------------- --------------------------
Revenue, net of royalties 46,068 34,822
Direct operating expense (9,535) (6,595)
Gross profit 36,533 28,227
Exploration and evaluation expense (5,809) (11,427)
Depletion, depreciation and amortisation (25,192) (18,677)
Impairment expense - (8,327)
Stock-based compensation (231) (178)
Share of profit from joint venture 696 1,161
General and administrative expenses
- Ongoing general and administrative
expenses (3,972) (4,581)
- Transaction costs (152) (1,079)
----------------------------------------- ----------------------------------- --------------------------
Operating income/(loss) 1,873 (14,881)
Finance costs (598) (510)
Foreign exchange gain/(loss) 153 (150)
Income/(loss) before income taxes 1,428 (15,541)
Current income tax expense (5,254) (2,249)
Profit/(loss) from discontinued
operations 1,768 (396)
Loss and total comprehensive loss
for the period (2,058) (18,186)
----------------------------------------- --------------------------
Net loss per share
Basic $(0.010) $(0.089)
Diluted $(0.010) $(0.089)
----------------------------------------- --------------------------
Consolidated Statement of Changes in Equity
Year ended 31 December
(US$'000s) 2020 2019
---------------------------------------- ---------------------------------- ---------------------------------
Share capital
Balance, beginning of period 2,593 88,899
Share-for-share exchange - old - (88,899)
Share-for-share exchange - new - 51,865
Capital reduction - (49,272)
Issue of shares 8 -
Balance, end of period 2,601 2,593
Share premium
Balance, beginning of period - -
Issue of shares 130 -
---------------------------------------- ---------------------------------- ---------------------------------
Balance, end of period 130 -
Share-based payment reserve
Balance, beginning of period 7,038 6,860
Share-based compensation for the period 231 178
---------------------------------------- ---------------------------------- ---------------------------------
Balance, end of period 7,269 7,038
Accumulated other comprehensive loss
Balance, beginning of period (917) (917)
Foreign currency translation adjustment - -
for the period
----------------------------------------
Balance, end of period (917) (917)
Merger reserve
Balance, beginning of period 37,034 -
Share-for-share exchange - 37,034
----------------------------------------
Balance, end of period 37,034 37,034
Retained earnings
Balance, beginning of period 52,283 21,197
Capital reduction - 49,272
Total comprehensive loss for the year (2,058) (18,186)
---------------------------------------- ---------------------------------- ---------------------------------
Balance, end of period 50,225 52,283
Total equity 96,342 98,031
---------------------------------------- ---------------------------------
Consolidated Statement of Cash Flows
Year ended 31 December
(US$'000s) 2020 2019
---------------------------------------------- ------------ ------------------------
Cash flows generated from/(used in) operating
activities
Income/(loss) before income taxes 1,428 (15,541)
Adjustments for:
Depletion, depreciation and amortisation 25,192 18,677
Exploration and evaluation expense 4,457 10,256
Impairment expense - 8,327
Finance expense 598 510
Stock-based compensation charge 231 178
Foreign exchange gain (369) (437)
Tax paid by state (5,107) (1,525)
Share of profit from joint venture (696) (1,161)
---------------------------------------------- ------------ ------------------------
Operating cash flow before working capital
movements 25,734 19,283
Increase in trade and other receivables (1,243) (3,572)
Increase/(decrease) in trade and other
payables 3,041 (1,584)
Payments for inventory (4,459) (556)
Payments for decommissioning (611) (155)
------------------------
Cash generated from operating activities 22,462 13,416
Income taxes paid (1,121) (1,306)
---------------------------------------------- ------------ ------------------------
Net cash generated from operating activities 21,341 12,110
Cash generated from discontinued operations 2,445 12,957
Cash flows generated from/(used in) investing
activities:
Property, plant and equipment expenditures (18,188) (24,777)
Exploration and evaluation expenditures (10,333) (3,647)
Net proceeds on disposal 3,500 -
Dividends received 773 639
------------------------
Net cash used in investing activities (24,248) (27,785)
Cash used in investing activities of
discontinued operations - (2,892)
Cash flows generated from/(used in) financing
activities:
Payments of lease liabilities (636) (795)
Finance costs paid (269) (267)
---------------------------------------------- ------------ ------------------------
Net cash used in financing activities (905) (1,062)
Decrease in cash and cash equivalents (1,367) (6,672)
Effect of foreign exchange on cash and
cash equivalents 369 381
Cash and cash equivalents, beginning
of period 11,054 17,345
---------------------------------------------- ------------ ------------------------
Cash and cash equivalents, end of period 10,056 11,054
---------------------------------------------- ------------------------
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)
Callum Stewart
Jason Grossman
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
Conference call details
Date: 19 March 2021
Time: 3:00pm GMT
United Kingdom Toll-Free 08003589473
United Kingdom Toll +44 3333000804
US Toll-Free +1 855 85 70686
US Toll +16319131422
Canada Toll-Free +18447479618
Canada Toll +1 4162164189
PIN: 13983770#
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" barrels of oil equivalent
------------------------------
"boe/d" barrels of oil equivalent per
day
------------------------------
"CO(2e) " carbon dioxide equivalent
------------------------------
"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 2021 production and capex guidance, liquidity and
sources of cash flows in 2021, the impact of COVID-19 on customer
consumption, future drilling developments and results, and
satisfying the conditions precedent to drawing 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 2020, 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 2021. 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
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
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END
FR UWVKRAVUOAAR
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