TIDMSDX
RNS Number : 0314X
SDX Energy Inc.
21 November 2017
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.
SDX ENERGY INC
("SDX" or the "Company")
SDX ENERGY INC. ANNOUNCES ITS THIRD QUARTER AND NINE MONTHS TO
SEPTEMBER 30, 2017 FINANCIAL AND OPERATING RESULTS
SDX Energy Inc. (TSXV, AIM: SDX), the North Africa focused oil
and gas company, is pleased to announce its financial and operating
results for the three and nine months ended September 30, 2017. All
dollar values are expressed in United States dollars net to the
Company unless otherwise stated.
Highlights - three and nine months ended September 30, 2017
Corporate and Financial
-- SDX's key financial metrics for the three and nine months
ended September 30, 2017 and 2016 are as follows;
Three months Nine months
ended ended
September September
30 30
--------------------------- --------------- ----------------
U$ millions except
per unit amounts 2017 2016 2017 2016
--------------------------- ------- ------ ------- -------
Net Revenues 10.1 2.9 28.2 7.6
------- ------ -------
Netback(1) 7.5 1.7 20.4 4.0
Net realized oil sales
and production service
fee - ($/bbl) 45.61 33.58 44.20 29.89
Net realized gas price
- ($/mmcf) (2) 6.56 - 6.47 -
Netback - US$/boe 23.54 15.10 22.82 12.14
Depletion, depreciation
and amortization(3) (4.6) (0.8) (13.1) (2.5)
Gain on acquisition 4.8 - 34.2 -
Total comprehensive
income/(loss) 4.4 0.1 30.9 (25.9)
Net cash generated
from/(used in) operating
activities (4.6) (1.7) 6.5 (2.6)
Cash and cash equivalents 30.5 5.0 30.5 5.0
--------------------------- ------- ------ ------- -------
Note:
(1) Refer to "Non-IFRS Measures" section of this release below
for details of Netback.
(2) Net realised average gas price in Morocco was US$9.43/mmcf
and Egypt was US$1.18/mmcf
(3) Increased DD&A reflects the impact of the acquisition of
Circle Oil's producing assets in Egypt and Morocco and the 8'
Pipeline in Morocco.
-- The above financial metrics for the three and nine months
ended September 30, 2017 reflect the impact of the acquisition of
the Egyptian and Moroccan businesses of Circle Oil PLC from January
27, 2017.
-- Netback for the nine months to September 30, 2017 was US$20.4
million, up from US$4.0 million for the nine months to September
30, 2016.
-- Cash position of US$30.5 million as at September, 30 2017.
Strong Netbacks and the proceeds of the recent Placing were offset
by a modest increase in the Egyptian General Petroleum Corporation
("EGPC") receivable.
-- Completed successful US$10.0 million Placing in September 2017.
-- The main components of SDX's comprehensive income of US$30.9
million for nine months ended September 30, 2017 are;
o US$20.4 million Netback for the period;
o US$34.2 million gain on acquisition of the Egyptian and
Moroccan businesses of Circle Oil PLC;
o US$13.1 million of DD&A - (increased as a result of Circle
transaction from US$2.5million in nine months ended September 30,
2016); and
o US$2.4 million of transaction and restructuring costs relating
to the above acquisition.
Operational Highlights
-- The Company's share of production from its operations for the
nine months ended September 30, 2017 was 3,280 barrels of oil
equivalent per day (boepd) analysed as follows;
o North West Gemsa 2,106 boepd
o Meseda 606 boepd
o Morocco 568 boepd
-- On a pro forma basis, assuming the acquisition of the
Egyptian and Moroccan businesses of Circle Oil PLC completed on
January 1, 2017, the Company's share of production from its
operations for the nine months ended September 30, 2017 would have
been 3,587 boepd analysed as follows;
o North West Gemsa 2,343 boepd
o Meseda 606 boepd
o Morocco 638 boepd
Egypt
-- In North West Gemsa (SDX:50%) in Q3 2017, the operator
completed the twelve well work-over programme focused on Electrical
Submersible Pump (ESP) installation and maintenance with the
objective of maintaining average production at c.5,000 boepd for
2017. The twelve well programme, which was completed under budget,
has successfully arrested reservoir decline and resulted in gross
sales volumes for Q3 2017 increasing to 4,556boepd from 4,502boepd
in Q2 2017. Post period end, the work-over rig activity continued
with one additional well successfully being worked over. The rig
has now moved to its next location, Al Amir 21(ST), where it plans
to re-perforate the Rahmi interval and then return the well to
production. Unitization talks with the offset operator are
temporarily on hold and are expected to recommence in the coming
months.
-- In Meseda (SDX:50%) in Q3 2017, the operator completed three
well workovers consisting of tubing and pump maintenance aimed at
ensuring future production uptime. An initial completion in the
recently drilled Rabul 1 well was also carried out. The expansion
of the central processing facility was completed in the quarter
with the installation of a new two-phase separator. Treating
capacity in the field has now increased from 10,000 barrels of
fluid per day (bfpd) to 20,000 bfpd. Now that the facility
expansion is complete, additional well work-overs will be
undertaken to upgrade existing ESPs which are anticipated to
increase well production rates. The intention is for this to take
place in 2018; the exact timing of these replacements is subject to
discussion with the operator. Post period end the results of the
Rabul 1 and 2 commitment wells were announced. Rabul 2, encountered
approximately 101.5 feet of net heavy oil pay across the Yusr and
Bakr sand formations, with an average porosity of 20%. Evaluation
of this well is still ongoing, after which the Company expects that
the well will be completed as a producer in the Yusr and Bakr and
connected to the central processing facilities at Meseda. Rabul 1
encountered 14.5 feet of net heavy oil pay with an average porosity
of 21.2% in the Yusr sands and has subsequently been completed as
an oil producer.
-- In South Disouq (SDX:55%) in Q3 2017, the Company submitted a
development plan to the authority, the Egyptian Natural Gas Holding
Company ("EGAS"), for the SD-1X discovery. The plan consists of the
drilling of two additional appraisal/development wells, the
installation of a rented central processing facility and the laying
of a 10km pipeline to the main export line. Gas price discussions
with the Egyptian State are ongoing and the outcome of these
discussions will determine the timing of the commencement of
development operations and first production. Depending on the
outcome of these discussions the Company anticipates production to
commence during H1 2018. Upon commencement of production, the
Company is targeting a plateau gross production rate of
approximately 50 million standard cubic feet per day (mmscfd) from
this discovery. Concurrent with the development plan preparation,
the Company also went to market with tenders for; a drilling rig,
the construction of the 10km pipeline and the procurement of a
rental central processing facility. Tenders are expected to be
returned, evaluated and awarded during the 4(th) quarter of
2017.
-- In the South Ramadan development concession (SDX 12.75%) in
Q3 2017, an extension to the drilling commitment was approved by
the authority, the General Petroleum Company ("GPC"), until October
2018. The prospectivity of the area was assessed and development
plans completed. A commercial evaluation was then commenced which
is expected to be completed in Q4 2017. Upon completion, the
Company expects to hold a meeting with the authority to determine
the way forward in the concession.
Morocco
-- In Q3 2017 the Company commenced drilling operations on a
nine well drilling campaign in the Sebou, Lalla Mimouna and Gharb
Centre permits (SDX:75% in all). The campaign includes seven
development/appraisal wells, six in Sebou and one in Gharb Centre,
and two exploration wells in Lalla Mimouna. All
development/appraisal locations in the Sebou and Gharb Centre
permits are adjacent to existing infrastructure and can be placed
on production quickly.
-- Post period end, the Company has announced that the first two
wells in the campaign, KSR-14 and KSR-15, were discoveries. The
KSR-14 well has been completed, tested at an average rate of
6.4mmscfd and placed on production whilst work is currently
underway to connect KSR-15 to the existing infrastructure. The rig
is currently moving to the site of the third well in the campaign,
KSR-16, with drilling operations expected to commence before the
end of November.
-- The Company completed a tender for 240km(2) of 3D seismic as
part of the work commitment for the Gharb Centre exploration
permit. The contract has been awarded to CGG with acquisition and
processing targeted for mid-2018. On completion of the
interpretation of the 3D seismic results, drilling locations will
be selected to target up to 20 Bscf (unrisked) of conventional
natural gas leads identified within the permit.
Outlook 2017/2018
Egypt
-- North West Gemsa
o Drill up to three development wells and continue with well
work-overs to minimise decline and maintain gross production at
c.4,500 - 5,000 boepd during 2018; and
o Complete unitization arrangement with offset operator and
prepare for any additional development activities.
-- Meseda
o Drill two development wells on the Rabul discovery area and
two lease line appraisal/development wells (pending government
approval) in the existing Meseda producing area;
o Replace up to five ESPs; and
o Continue with waterflood programme and other debottlenecking
initiatives to increase field recovery efficiency.
-- South Disouq
o Commence South Disouq development activities including the
drilling of two development wells and construction of 10km
pipeline, targeting first production during H1 2018; and
o During the second exploration phase, continue the targeting of
prospective gas resources outside of the SD-1X discovery area and
seek to confirm the deeper oil potential within the SD-1X discovery
area. Well planning is in progress, with the next exploration well
expected to spud in H1 2018.
Morocco
-- Sebou
o Drill one further development/appraisal well by 31 December
2017;
o Complete remaining three development/appraisal wells in Q1
2018; and
o Look to increase gas volumes to existing customers and agree
contracts with, and start supplying volumes to, new customers.
-- Lalla Mimouna
o Drill two exploration prospects in Q1 2018.
-- Gharb Centre
o Drill one development/appraisal well in Q4 2017/Q1 2018;
and
o Commence preparation for the acquisition of 240km(2) of 3D
seismic in 2018.
Corporate
-- Continue to explore opportunities to expand asset base in the North Africa region; and
-- Continue to minimise costs and crystallise synergies
post-completion of the acquisition of Circle Oil PLC's businesses
in Egypt and Morocco.
Paul Welch, President & CEO of SDX Energy, commented:
"This has been one of the Company's strongest quarters yet, with
net revenue for the period up 271% year on year and drilling
success being achieved across our North African portfolio. We are
already starting to see the financial benefits of the Circle Oil
acquisition come through, in both Egypt and Morocco, reconfirming
the value of this transaction for shareholders.
We announced a successful $10 million fundraise during the
period, which allows us to accelerate our drilling programmes in
Egypt and Morocco. We have made an excellent start to the Morocco
drilling campaign, announcing two discoveries from the first two
wells and we remain well placed to meet our production and sales
targets from the programme.
In Egypt, we are pleased to have completed the twelve well
work-over programme focused on ESP installation and maintenance at
North West Gemsa and remain on track to achieve our production
target of c.5,000 boepd for 2017. At Meseda, we completed the
expansion of the processing facility, increasing treating capacity
to 20,000 bfpd, and at South Disouq we submitted our development
plan to EGAS, and are targeting first gas on the licence during H1
2018. In Morocco, the Company commenced its nine well drilling
programme in the Sebou, Lalla Mimouna and Gharb Centre permits and
post period end announced that the first two wells in the campaign,
KSR-14 and KSR-15, were discoveries. We plan to bring both wells
into production during Q4 of this year."
KEY FINANCIAL & OPERATING HIGHLIGHTS
Unaudited interim consolidated financial statements with
Management's Discussion and Analysis for the three and nine months
ended 30 September 2017 are now available on the Company's website
at www.sdxenergy.com and on SEDAR at www.sedar.com.
FINANCIAL STATEMENTS
Three months Nine months
ended ended
Prior September September
Quarter 30 30
---------------------------- ---------- -------------------- --------------------
$000s except per unit
amounts 2017 2016 2017 2016
---------------------------- ---------- ---------- -------- --------- ---------
FINANCIAL
---------------------------- ---------- ---------- -------- --------- ---------
Gross Revenues 13,338 13,902 3,752 38,310 9,926
Royalties (3,437) (3,778) (823) (10,149) (2,366)
Net Revenues 9,901 10,124 2,929 28,161 7,560
Operating costs (3,009) (2,672) (1,241) (7,728) (3,530)
Netback 6,892 7,452 1,688 20,433 4,030
Total comprehensive
income/(loss) (427) 4,408 140 30,941 (25,907)
Net income/(loss)
per share - basic (0.005) 0.022 0.002 0.170 (0.452)
Cash, end of period 27,627 30,469 4,961 30,469 4,961
Working capital (excluding
cash) 15,421 27,928 4,632 27,928 4,632
Capital expenditures 1,504 3,423 188 5,738 12,482
Total assets 132,766 138,898 43,901 138,898 43,901
Shareholders' equity 102,559 116,981 39,161 116,981 39,161
Common shares outstanding
(000's) 186,900 204,459 79,844 204,459 79,844
OPERATIONAL
---------------------------- ---------- ---------- -------- --------- ---------
Oil sales (bbl/d) 1,832 1,893 510 1,741 557
Gas sales (boe/d) 1,012 942 - 882 -
NGL Sales (bbl/d) 58 53 - 51 -
Production service
fee (bbl/d) 623 551 704 606 656
Total sales and production
service fee boe/d 3,525 3,439 1,214 3,280 1,213
---------------------------- ---------- ---------- -------- --------- ---------
Realized oil price
(US$/bbl) 45.56 48.28 40.84 47.46 36.14
Realized service fee
(US$/bbl) 33.98 36.41 28.32 34.84 24.57
---------------------------- ---------- ---------- -------- --------- ---------
Net oil sales and
production service
fee realized price
($/bbl) 42.62 45.61 33.58 44.20 29.89
---------------------------- ---------- ---------- -------- --------- ---------
Realized gas price
(US$/mcf) 6.46 6.56 - 6.47 -
Realized NGL price
(US$/bbl) 46.35 47.19 - 46.86 -
---------------------------- ---------- ---------- -------- --------- ---------
Net realized price
- all products (US$/boe) 41.57 43.92 33.58 42.79 29.89
---------------------------- ---------- ---------- -------- --------- ---------
Royalties ($/bbl) 10.71 11.94 7.37 11.34 7.12
Operating costs ($/bbl) 9.38 8.44 11.11 8.63 10.63
Netback ($/bbl) 21.48 23.54 15.10 22.82 12.14
SDX is an international oil and gas exploration, production and
development company, headquartered in London, England, UK, with a
principal focus on North Africa. In Egypt, SDX Energy has a working
interest in two producing assets (50% North West Gemsa & 50%
Meseda) located onshore in the Eastern Desert, adjacent to the Gulf
of Suez. In Morocco, SDX has a 75% working interest in the Sebou
concession situated in the Gharb Basin. These producing assets are
characterised by exceptionally low operating costs making them
particularly resilient in a low oil price environment. SDX Energy's
portfolio also includes three high impact exploration
opportunities, South Disouq in Egypt and Lalla Mimouna and Gharb
Centre in Morocco.
For further information, please see the website of the Company
at www.sdxenergy.com or the Company's filed documents at
www.sedar.com.
For further information:
SDX Energy Inc.
Paul Welch
President and Chief Executive Mark Reid
Officer Chief Financial Officer
Tel: +44 203 219 5640 Tel: +44 203 219 5640
Stifel Nicolaus Europe
Limited (Nominated Adviser
and Joint Broker)
Callum Stewart
Nicholas Rhodes
Ashton Clanfield
Tel: +44 (0) 20 7710 7600
Cantor Fitzgerald Europe
(Joint Broker)
Sarah Wharry
Tel: +44 207 894 7000
GMP FirstEnergy (Joint
Broker)
Jonathan Wright/David
van Erp
Tel: +44 207 448 0200
Celicourt (PR)
Mark Antelme/Jimmy Lea
Tel: +44 207 520 9260
Neither TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in policies of the TSX Venture
Exchange) accepts responsibility for the adequacy or accuracy of
this release.
Glossary
"bbl" barrels
"bfpd" barrels of fluid per
day
"boe" barrels of oil equivalent
"boepd" barrels of oil equivalent
per day
"Bscf" billion standard cubic
feet
"ESP" electrical submersible
pump
"mmcf" million cubic feet
"mmscfd" million standard cubic
feet per day
"NGL" natural gas liquids
Advisory
Forward-Looking Statements
Certain statements contained in this press release constitute
"forward-looking statements" 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 statements. In particular, statements concerning
the upgrade of ESPs in Meseda and the results thereof; the
completion of the Rabul 2 well and its connection to the processing
facilities at Meseda; the timing and rate of production at South
Disouq and the timing of tender awards; planned drilling and
governmental consultation at the South Ramadan concession; the
Company's production target, the well workover programme and
unitization arrangement at North West Gemsa; the timing of drilling
at KSR-16; the Company's plan to bring KSR-14 and KSR-15 into
production in Q4 2017; planned activities and exploration and/or
development wells at North West Gemsa, Meseda, South Disouq, Sebou,
Lalla Mimouna and Gharb Centre; the Company's plans; and the
expected realization of synergies arising from the acquisition of
the Egyptian and Moroccan businesses of Circle Oil PLC, should all
be viewed as forward-looking statements.
The forward-looking statements contained in this document are
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 statements 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; the sufficiency of budgeted capital expenditures
in carrying out planned activities; and the availability and cost
of labour and services.
By their very nature, forward-looking statements are 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.
The risks and uncertainties that may cause actual results to differ
materially from the forward-looking statements or information
include, among other things: the ability of Management to execute
its business plan; general economic and business conditions; the
risk of war or instability affecting countries or states in which
the Company operates; the risks of the oil and natural gas
industry, such as operational risks in exploring for, developing
and producing crude oil and natural gas; market demand; the
possibility that government policies or laws may change or
governmental approvals may be delayed or withheld; risks and
uncertainties involving geology of oil and natural gas deposits;
the uncertainty of reserves estimates and reserves life; the
ability of the Company to add production and reserves through
acquisition, development and exploration activities; the Company's
ability to enter into or renew production sharing concession;
potential delays or changes in plans with respect to exploration or
development projects or capital expenditures; the uncertainty of
estimates and projections relating to production (including decline
rates), costs and expenses; fluctuations in oil and natural gas
prices, foreign currency exchange, and interest rates; risks
inherent in the Company's marketing operations, including credit
risk; uncertainty in amounts and timing of oil revenue payments;
health, safety and environmental risks; risks associated with
existing and potential future law suits and regulatory actions
against the Company; uncertainties as to the availability and cost
of financing; and financial risks affecting the value of the
Company's investments. Readers are cautioned that the foregoing
list is not exhaustive of all possible risks and uncertainties.
The forward-looking statements contained in this press release
are made as of the date hereof and SDX does not undertake any
obligation to update publicly or to revise any of the included
forward-looking statements, except as required by applicable law.
The forward-looking statements contained herein are expressly
qualified by this cautionary statement.
Non-IFRS Measures
This news release contains the term "Netback," which does not
have a recognized meaning 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. See note
20 of unaudited interim Consolidated Financial Statements for
reconciliation of netback to operating income.
Oil and Gas Advisory
Certain disclosure in this news release constitute "anticipated
results" for the purposes of National Instrument 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 pay thickness, estimates of flow rate and
estimates of volume and hydrocarbon content attributable to the
resources of the Company. Such estimates have been prepared by
management of the Company 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.
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 Paul Welch,
President and Chief Executive Officer of SDX. Mr. Welch, who has
over 30 years of experience, is the qualified person as defined in
the London Stock Exchange's Guidance Note for Mining and Oil and
Gas companies. Mr. Welch holds a BS and MS in Petroleum Engineering
from the Colorado School of Mines in Golden, CO. USA and an MBA in
Finance from SMU in Dallas, TX USA and is a member of the Society
of Petroleum Engineers (SPE).
This information is provided by RNS
The company news service from the London Stock Exchange
END
QRTLLFEDLALIFID
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