TIDMSDX
RNS Number : 8319E
SDX Energy PLC
12 July 2021
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SDX TO CONSTITUTE INSIDE INFORMATION AS STIPULATED UNDER THE MARKET
ABUSE REGULATION (EU) NO. 596/2014 AS IT FORMS PART OF UK LAW BY
VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018 ("MAR"). ON THE
PUBLICATION OF THIS ANNOUNCEMENT VIA A REGULATORY INFORMATION
SERVICE ("RIS"), THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE IN
THE PUBLIC DOMAIN.
12 July 2021
SDX ENERGY PLC ("SDX" or the "Company")
TRADING AND OPERATIONS UPDATE FOR THE SIX MONTHS TO 30 JUNE
2021
SDX Energy Plc (AIM: SDX), the MENA-focused oil and gas company,
is pleased to provide an unaudited update on its operating results
and cash and liquidity position for the six months ended 30 June
2021. All monetary values are expressed in United States dollars
net to the Company unless otherwise stated.
Mark Reid, CEO of SDX, commented:
"It has been a busy period for the Company, with multiple
drilling campaigns running in tandem and successful results to show
for our efforts already. We are very pleased that our three
appraisal/ development wells drilled in Morocco are commercial
successes, with two of the wells already connected and producing,
contributing to average production of 5,930 boe/d for the period,
above our 2021 guidance. The outlook for the remainder of the year
is exciting as we look forward to results of the IY-2 step-out
development well at South Disouq as well as spudding and drilling
the Hanut well, which if successful could provide a
transformational resource increase for SDX. We look forward to
updating the market on these key catalysts in due course."
Six months to 30 June 2021
Production
-- Average entitlement production for the period of c.5,930
boe/d, 3% higher than 2021 mid-point market guidance of 5,770
boe/d.
Asset Gross Production Gross Production Entitlement Entitlement
Actual - Guidance Production Production Guidance
6 months ended - 12 months Actual (boe/d) (boe/d) -
30 June 2021 ended 31 - 12 months ended
December 6 months ended 31 December
2021 30 June 2021(1) 2021
South Disouq - WI
55% 45.2 MMscfe/d 44 - 46 MMscfe/d 4,415 - 4,430 4,300 - 4,500
------------------ ------------------ ----------------- ---------------------
West Gharib - WI 2,350 - 2,650
50% 2,705 bbl/d bbl/d 510 - 520 446 - 505
------------------ ------------------ ----------------- ---------------------
7.0 - 7.3
Morocco - WI 75% 7.9 MMscf/d MMscf/d 990 - 995 874 - 915
------------------ ------------------ ----------------- ---------------------
Total 5,915 - 5,945 5,620 - 5,920
----------------- ---------------------
(1) Subject to final June invoicing
Morocco and Egypt drilling
-- The first phase of the Morocco drilling campaign, which
consisted of three appraisal/development wells in SDX's operated
Gharb Basin acreage in Morocco (SDX: 75% working interest), was
successfully completed in June 2021.
-- The OYF-3, KSR-17 and KSR-18 wells were all commercial
successes, with OYF-3 and KSR-17 already connected and producing
into the Company's infrastructure, with KSR-18 to be tested and
connected shortly. Management estimates that 1.5-1.6bcf of gross
resources have been added by these wells, which is in line with
pre-drill P50 estimates. Preparations are underway for the drilling
of up to two additional wells in Morocco later in the year.
-- During the first half of the year, the Company received the
COVID-19 delayed laboratory analysis of the cuttings and side wall
cores from the LMS-2 well. This information confirmed that LMS-2
had successfully encountered the targeted thermogenic gas source
that exists in the Top Nappe horizon but that the reservoir in the
Lalla Mimouna Nord concession has low permeability and the well is
unlikely to flow conventionally. As such, the Company will not risk
US$0.5 million testing this well, nor will it commit to further
investment in the Lalla Mimouna Nord concession post the end of the
concession date in July 2021 as a result of the limited likelihood
of it being commercially developed. Accordingly, the Company
expects to recognise a US$10.3 million non-cash impairment charge
in Q2 ahead of relinquishment, of which US$2.8 million relates to
LMS-2.
-- In South Disouq, the IY-2 step-out development well, the
first of a two-well campaign, was spud in late June with the
Company expecting to update the market on its result later in July.
The second well, the HA-1X exploration well on the Hanut prospect,
is expected to spud after the completion of IY-2 in early August.
HA-1X, which is targeting gross unrisked mean recoverable volumes
of 139bcf with a 33% chance of success, is expected to take
approximately one month to drill and the Company expects to update
the market on its result in mid-September.
-- In West Gharib, following the ten-year concession extension
granted earlier in 2021, preparations continued for a campaign of
three to four development wells, the first of which is expected to
spud in early Q3.
Capex
-- Capex for the six months to 30 June 2021 is shown below and
is compared to an updated guidance figure of US$26.5-28.0 million
(previous guidance US$25.0-26.5 million):
Asset Guidance - Actual - 6
12 months ended months ended
31 December 30 June 2021
2021
South Disouq - US$7.0 - 7.5 US$3.7 million(1)
WI 55% million
----------------- -------------------
West Gharib - WI US$2.5 - 3.0 US$1.2 million
50% million
----------------- -------------------
Morocco - WI 75% US$17.0 - 17.5 US$10.9 million(2)
million
----------------- -------------------
Total US$26.5 - 28.0 US$15.8 million
million
----------------- -------------------
(1) Includes US$0.6 million of expenditure that was pre-paid as
a project milestone in 2020 but has now been reclassified to
capex
(2) Includes US$0.5 million of non-cash decommissioning
provisions
-- Capex guidance for Morocco for the 12 months ended 31
December 2021 has been increased by US$1.5 million as the wells
planned for the second phase of the 2021 campaign in the second
half of the year are deeper, requiring greater drilling time, than
those included in the original guidance. Group 2021 capex guidance
is now US$26.5 - 28.0 million.
-- H1 2021 expenditure by asset was as follows:
o South Disouq: US$3.7 million of capex for the compressor
project (US$1.5 million), the IY-2 development well (US$0.6
million), the completion of the SD-12X tie in (US$0.4 million),
planning for the HA-1X exploration well (US$0.2 million), the
workovers of SD-4X and SD-1X (US$0.2 million) and other CPF
projects.
o West Gharib: US$1.2 million on well workovers and development
drilling preparations; and
o Morocco: US$10.9 million on three development wells (US$8.9
million, including US$0.5 million of decommissioning provisions)
and a well workover campaign (US$2.0 million).
Cash and liquidity
-- Cash and liquidity remains strong with cash as at 30 June
2021 of c.US$9.1 million and the US$10.0 million EBRD credit
facility remaining undrawn and available.
-- Together with cash generated from operations, the Company is
fully funded for all of its planned activities in 2021 and
2022.
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
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
---------------------------------------
"P50" means that there is at least
a 50% probability that the quantities
actually recovered will equal
or exceed the best estimate.
---------------------------------------
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, and future drilling developments and results should
all be regarded as forward-looking information.
The forward-looking information contained in this document is
based on certain assumptions, and although management considers
these assumptions to be reasonable based on information currently
available to them, undue reliance should not be placed on the
forward-looking information because SDX can give no assurances that
they may prove to be correct. This includes, but is not limited to,
assumptions related to, among other things, commodity prices and
interest and foreign exchange rates; planned synergies, capital
efficiencies and cost - savings; applicable tax laws; future
production rates; receipt of necessary permits; the sufficiency of
budgeted capital expenditures in carrying out planned activities,
and the availability and cost of labour and services.
All timing given in this announcement, unless stated otherwise,
is indicative, and while the Company endeavours to provide accurate
timing to the market, it cautions that, due to the nature of its
operations and reliance on third parties, this is subject to
change, often at little or no notice. If there is a delay or change
to any of the timings indicated in this announcement, the Company
shall update the market without delay.
Forward-looking information is subject to certain risks and
uncertainties (both general and specific) that could cause actual
events or outcomes to differ materially from those anticipated or
implied by such forward - looking statements. Such risks and other
factors include, but are not limited to, political, social, and
other risks inherent in daily operations for the Company, risks
associated with the industries in which the Company operates, such
as: operational risks; delays or changes in plans with respect to
growth projects or capital expenditures; costs and expenses;
health, safety and environmental risks; commodity price, interest
rate and exchange rate fluctuations; environmental risks;
competition; permitting risks; the ability to access sufficient
capital from internal and external sources; and changes in
legislation, including but not limited to tax laws and
environmental regulations. Readers are cautioned that the foregoing
list of risk factors is not exhaustive and are advised to refer to
the Principal Risks & Uncertainties section of SDX's Annual
Report for the year ended 31 December 2020, which can be found on
the Company's website at https://www.sdxenergy.com/ and on SDX's
SEDAR profile at www.sedar.com , for a description of additional
risks and uncertainties associated with SDX's business.
The forward-looking information contained in this press release
is as of the date hereof and SDX does not undertake any obligation
to update publicly or to revise any of the included forward --
looking information, except as required by applicable law. The
forward -- looking information contained herein is expressly
qualified by this cautionary statement.
Oil and Gas Advisory
Certain disclosures in this news release constitute "anticipated
results" for the purposes of National Instrument 51-101 - Standards
of Disclosure for Oil and Gas Activities ("NI 51-101") of the
Canadian Securities Administrators because the disclosure in
question may, in the opinion of a reasonable person, indicate the
potential value or quantities of resources in respect of the
Company's resources or a portion of its resources. Without
limitation, the anticipated results disclosed in this news release
include estimates of volume, flow rate, production rates, porosity,
and pay thickness attributable to the resources of the Company.
Such estimates have been prepared by Company management and have
not been prepared or reviewed by an independent qualified reserves
evaluator or auditor. Anticipated results are subject to certain
risks and uncertainties, including those described above and
various geological, technical, operational, engineering,
commercial, and technical risks. In addition, the geotechnical
analysis and engineering to be conducted in respect of such
resources is not complete. Such risks and uncertainties may cause
the anticipated results disclosed herein to be inaccurate. Actual
results may vary, perhaps materially.
Use of the term "boe" or the term "MMscf" may be misleading,
particularly if used in isolation. A "boe" conversion ratio of 6
Mcf: 1 bbl and a "Mcf" conversion ratio of 1 bbl: 6 Mcf are based
on an energy equivalency conversion method primarily applicable at
the burner tip and does not represent a value equivalency at the
wellhead.
Prospective Resources Data
The prospective resources estimates disclosed or referenced
herein have been prepared by Dr. Rob Cook, a qualified reserves
evaluator, in accordance with the SPE's Canadian Oil and Gas
Evaluation Handbook and in accordance with NI 51-101. The
prospective resources disclosed herein have an effective date of 31
December 2020. Prospective resources are those quantities of gas,
estimated as of the given date, to be potentially recoverable from
undiscovered accumulations through future development projects. As
prospective resources, there is no certainty that any portion of
the resources will be discovered. The chance that an exploration
project will result in a discovery is referred to as the "chance of
discovery" as defined by the management of the Company.
There is no certainty that it will be commercially viable to
produce any portion of the resources discussed herein; though any
discovery that is commercially viable would be tied back to the
Company's pipeline in Morocco and then connected to customers'
facilities within 9 to 12 months of discovery. Based upon the
economic analysis undertaken on any discovery, management has
attributed an associated chance of development of 100%.
There are uncertainties associated with the volume estimates of
the prospective resources disclosed herein, due to the level of
information available on prospective resources, but ranges are
defined based on data from the Company's nearby existing analogous
wells. Some of the risks and uncertainties are outlined below:
-- Petrophysical parameters of the sand/reservoir;
-- Fluid composition, especially heavy end hydrocarbons;
-- Accurate estimation of reservoir conditions (pressure and temperature);
-- Reservoir drive mechanism;
-- Potential well deliverability; and
-- The thickness and lateral extent of the reservoir section,
currently based on 3D seismic data.
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