TIDMSDX
RNS Number : 3520U
SDX Energy PLC
01 August 2022
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THE PUBLIC DOMAIN.
1 August 2022
SDX ENERGY PLC ("SDX" or the "Company")
30 JUNE 2022 TRADING AND OPERATIONS UPDATE AND INCREASE TO 2022
GROUP PRODUCTION AND CAPEX GUIDANCE
Highlights:
-- Increased production guidance: Group 2022 entitlement
production guidance is increased to 3,480 - 3,795 boe/d from 3,330
- 3,550 boe/d
-- US$1.8 million increase to 2022 mid-point capex guidance.
-- Net Cash position of US$12.8m (unaudited) as of 30 June 2022
-- With the introduction of Aleph Commodities Limited as a new
cornerstone shareholder, a strategic review and expansion plans are
being formulated with a focus on increased production, reserves and
shareholder returns.
SDX Energy Plc (AIM: SDX), the EMEA-focused energy company,
provides an update on production and capex guidance for 2022
following drilling success at South Disouq and provides an update
on its unaudited capex, cash, and liquidity position for the six
months ended 30 June 2022. All monetary values are expressed in
United States dollars net to the Company unless otherwise
stated.
Mark Reid, CEO of SDX, commented:
"Following on from our previously announced drilling success at
SD-5X in South Disouq, which also includes a richer than expected
condensate yield, I am pleased to announce that our 2022 production
guidance for this asset is being increased by 15%. Although we have
had to slightly reduce our West Gharib production guidance due to
mechanical issues with one of the rigs, our overall 2022 group
mid-point guidance has increased to 3,480 - 3,795 boe/d from 3,330
- 3,550 boe/d . Given that both the SD-5X and MA-1X wells in South
Disouq encountered gas, we have also slightly increased our capex
guidance by US$1.8 million, reflecting the costs of completing and
testing these wells and tying in SD-5X. I am also pleased to report
continued strong production of 3,742 boe/d in the first half of the
year which is above our increased 3,638 boe/d mid-point entitlement
guidance, and a robust net cash position of US$12.8 million as at
30 June 2022. Finally, we are working with our new cornerstone
shareholder Aleph Commodities Limited on a refreshed and ambitious
strategy and we will be updating the market on the outcome of this
in the weeks ahead."
2022 Production and Capex guidance revisions
-- Group 2022 entitlement production guidance is increased to
3,480 - 3,795 boe/d from 3,330 - 3,550 boe/d for the reasons
outlined below.
-- Following the successful drilling and production testing of
the SD-5X well, gross 2022 production guidance for South Disouq has
been revised upward to 38-40 MMscfe/d from 33-35 MMscfe/d, a 15%
mid-point guidance increase. On a net entitlement basis, the new
guidance is 2,500-2,700 boe/d, increasing from 2,280-2,420
boe/d.
-- As disclosed previously, the SD-5X well is currently
producing greater amounts of condensate (gross 100-110 bbl/d) than
were expected pre-drill (gross 25-30 bbl/d). As South Disouq
condensate is sold at 90% of Brent price, this product is highly
cash-generative in the current pricing environment, with Netbacks
of US$60.93/boe for the six months ending 30 June 2022.
-- Due to drilling delays resulting from mechanical issues
experienced with one of the rigs working on the 13-well West Gharib
drilling campaign, gross 2022 production guidance has been revised
downwards to 2,000-2,450 bbl/d from 2,200-2,650 bbl/d, an 8%
mid-point decrease. On a net entitlement basis, the new guidance is
380-470 boe/d, decreasing from 420-505 boe/d.
-- Morocco production guidance remains unchanged at gross
4.8-5.0 MMscf/d, 600-625 boe/d net entitlement.
-- Following the successful drilling, completion testing and tie
in of SD-5X, and the drilling, completion and testing of the MA-1X
exploration well, both of which were previously assumed to be dry
holes for capex guidance purposes, South Disouq capex guidance has
been revised upward from US$6.7-7.2 million to US$8.5-9.0
million.
-- West Gharib capex guidance range has been revised downward by
US$0.5 million reflecting drilling delays, with updated guidance of
US$4.0-4.5 million. Morocco capex guidance is unchanged, meaning
group capex guidance is now US$25.5-27.0 million, versus previous
guidance of US$23.7-25.2 million.
Trading and operations update six months to 30 June 2022
Production
-- Average entitlement production as at 30 June 2022 of 3,724
boe/d, which was 2% higher than the increased mid-point 2022 market
guidance of 3,638 boe/d.
Gross production SDX entitlement production
Asset Revised guidance Actual - Revised guidance Actual Actual
- 12 months 6 months - 6 months 6 months
ended 31 December ended 30 12 months ended ended 30 ended 30
2022 June 2022 31 December June 2022 June 2021
2022 (boe/d) (boe/d) (boe/d)
-------------------- --------------- ----------------- ----------- -----------
South Disouq
- WI 36.9% &
67.0%(1) 38 - 40 MMscfe/d 38.7 MMscfe/d 2,500 - 2,700(2) 2,710 4,422(3)
-------------------- --------------- ----------------- ----------- -----------
West Gharib 2,000 - 2,450
- WI 50% bbl/d 1,976 bbl/d 380 - 470 376 516
-------------------- --------------- ----------------- ----------- -----------
Morocco - WI 4.8 - 5.0
75% MMscf/d 5.1 MMscf/d 600 - 625 638 993
-------------------- --------------- ----------------- ----------- -----------
Total 3,480 - 3,795 3,724 5,931
----------------- ----------- -----------
(1) After completion of the South Disouq disposal with effect from 1 February 2022.
(2) Net of minority interest. Gross of minority interest,
production guidance is expected to be 3,500 - 3,700 boe/d.
(3) 30 June 2021 South Disouq entitlement production is shown at
pre-disposal working interest of 55%/100%.
-- Production of 3,724 boe/d for the first half of the year,
which is above our increased 3,638 boe/d mid-point entitlement
guidance, was driven by strong performances in Morocco and at South
Disouq, with West Gharib's production lower than expected due to
the mechanical issues with a previous rig that is in the process of
being replaced. West Gharib production is expected to increase in
the second half of the year.
-- In South Disouq, the planned three-well drilling campaign has
been successfully completed. SD-5X and SD-12_East have been brought
online ahead of schedule and are now contributing to production and
cash flow. The MA-1X gas discovery well is in the process of being
evaluated to determine a commercialisation strategy for the
discovery.
-- In West Gharib the MSD-21, -25 and -24 wells have been
successfully completed and are on production. The completion of
operations of the MSD-23 well was announced on 15 July and MSD-27
spudded on 21 July. Operations at the MSD-20 well are expected to
recommence in August 2022.
-- In Morocco, preparations continue for the recommencement of
the drilling campaign that was suspended in December 2021. The
first of up to seven wells to be drilled in the next year is
expected to spud in late July 2022.
Capex
-- Capex for the six months to 30 June 2022 was within revised guidance, as shown below:
Asset Revised guidance Actual - 6 months
- 12 months ended ended 30 June
31 December 2022 2022 (unaudited)
South Disouq - WI US$9.0-9.5 million(2) US$7.7 million
36.9% & 67.0%(1) (3)
---------------------- ------------------
West Gharib - WI US$4.0-4.5 million US$1.5 million
50%
---------------------- ------------------
Morocco - WI 75% US$12.5-13.0 US$3.0 million
million
---------------------- ------------------
Total US$25.5-27.0 US$12.2 million
million
---------------------- ------------------
(1) After completion of the South Disouq disposal with effect from 1 February 2022.
(2) As the legal entity that holds the South Disouq asset is
100% consolidated in the financial statements of the Company, capex
guidance is gross of minority interest. Net of minority interest,
capex guidance is US$7.5 - 8.0 million.
(3) Includes US$0.3 million of decommissioning provisions. Net
of minority interest, SDX's share of capex for the 6 months ended
30 June 2022 was US$6.3 million.
-- Capex as at 30 June 2022 of US$12.2 million, reflects:
o US$7.4 million for the three-well drilling campaign at South
Disouq split between: US$2.0 million for the drilling, completion,
testing and tie in of the SD-5X well, US$3.0 million for the
drilling, completion and tie in of the SD-12_East well and US$2.4
million for the drilling, completion and testing of the MA-1X well.
US$0.3 million has been spent on a workover of SD-3X to replace the
production tubing.
o US$2.4 million of pre-drilling and preparation costs
associated with the re-commencement of the Moroccan drilling
campaign, US$0.3 million on the SAH-4 well recompletion and US$0.3
million of infrastructure works; and
o US$1.5 million of West Gharib drilling costs across the
MSD-20, -21, -23, -24, and -25 wells.
Cash and liquidity
-- The Company's net cash position as at 30 June 2022 was
US$12.8 million, with cash balances of US$15.3 million offset by
US$2.5 million drawn debt from the EBRD facility. As a result of
various geopolitical factors, US dollar transfers by the Central
Bank of Egypt have been delayed. Under the existing facility with
the European Bank of Reconstruction and Development ("EBRD"),
US$3.2 million of additional undrawn lines remain available to the
Company.
-- Together with cash generated from operations, the Company is
fully funded for all its stated objectives in 2022.
Corporate
In July 2022, Aleph Commodities Limited acquired 25.65% of the
issued share capital of the Company and are assisting the Company
with a strategic review and expansion plans with a focus on
increasing production, reserves and shareholder returns. Aleph
Commodities Limited is a global trading and investment company,
founded in 2018 by former executives of Deutsche Bank, Goldman
Sachs, JP Morgan, Engelhart Commodities Trading Partners, and
Credit Suisse, supported by several large US and European family
offices who are also shareholders of Aleph.
About SDX
SDX is an international oil and gas exploration, production, and
development company, headquartered in London, United Kingdom, with
a principal focus on EMEA. In Egypt, SDX has a working interest in
two producing assets: a 36.9% operated interest in the South Disouq
and Ibn Yunus gas fields and a 67.0% operated interest in the Ibn
Yunus North 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 four 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.sdxenergygroup.com or the Company's filed documents at
www.sedar.com .
Standard
Estimates of reserves and resources have been prepared in
accordance with the June 2018 Society of Petroleum Engineers
("SPE") Petroleum Resources Management System ("PRMS") as the
standard for classification and reporting with an effective date of
31 December 2021 and in accordance with National Instrument 51-101
- Standards of Disclosure for Oil and Gas Activities ("NI 51-101")
of the Canadian Securities Administrators.
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 Dr Rob Cook, VP
Subsurface of SDX. Dr. Cook has 30 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 Broker)
Callum Stewart
Jason Grossman
Ashton Clanfield
Tel: +44 (0) 20 7710 7600
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
------------------------------
"boe/d" barrels of oil equivalent per
day
------------------------------
"MMscf/d" million standard cubic feet
per day
------------------------------
"MMscfe/d" million standard cubic feet
equivalent per day
------------------------------
Forward-looking information
Certain statements contained in this press release may
constitute "forward-looking information" as such term is used in
applicable Canadian securities laws. Any statements that express or
involve discussions with respect to predictions, expectations,
beliefs, plans, projections, objectives, assumptions, or future
events or are not statements of historical fact should be viewed as
forward-looking information. In particular, statements regarding
the formulation of the Company's strategic review and expansion
plans, and the Company's future drilling developments and results,
should 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 2021, 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 term "Netback", which is not a
recognized measure under IFRS and may not be comparable to similar
measures presented by other issuers. The Company uses this measure
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.
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 2022. Prospective resources are those quantities of gas,
estimated as of the given date, to be potentially recoverable from
undiscovered accumulations through future development projects. As
prospective resources, there is no certainty that any portion of
the resources will be discovered. The chance that an exploration
project will result in a discovery is referred to as the "chance of
discovery" as defined by the management of the Company.
There is no certainty that it will be commercially viable to
produce any portion of the resources discussed herein; though any
discovery that is commercially viable would be tied back to the
Company's pipeline in Morocco and then connected to customers'
facilities within 9 to 12 months of discovery. Based upon the
economic analysis undertaken on any discovery, management has
attributed an associated chance of development of 100%.
There are uncertainties associated with the volume estimates of
the prospective resources disclosed herein, due to the level of
information available on prospective resources, but ranges are
defined based on data from the Company's nearby existing analogous
wells. Some of the risks and uncertainties are outlined below:
-- Petrophysical parameters of the sand/reservoir;
-- Fluid composition, especially heavy end hydrocarbons;
-- Accurate estimation of reservoir conditions (pressure and temperature);
-- Reservoir drive mechanism;
-- Potential well deliverability; and
-- The thickness and lateral extent of the reservoir section,
currently based on 3D seismic data.
"P50" means that there is at least a 50% probability that the
quantities actually recovered will equal or exceed the best
estimate.
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