TIDMSDX
RNS Number : 6390W
SDX Energy PLC
20 August 2020
THE INFORMATION CONTAINED WITHIN THIS ANNOUNCEMENT IS DEEMED BY
SDX TO CONSTITUTE INSIDE INFORMATION AS STIPULATED UNDER THE MARKET
ABUSE REGULATION (EU) NO. 596/2014 ("MAR"). ON THE PUBLICATION OF
THIS ANNOUNCEMENT VIA A REGULATORY INFORMATION SERVICE ("RIS"),
THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC
DOMAIN.
20 August 2020
SDX ENERGY PLC ("SDX" or the "Company")
ANNOUNCES H1 2020 FINANCIAL AND OPERATING RESULTS
SDX Energy Plc (AIM: SDX), the MENA-focused oil and gas company,
is pleased to announce its unaudited financial and operating
results for the six months ended 30 June 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
today at 3:00pm UK time, details of which can be found in the
release below.
Mark Reid, CEO of SDX, commented:
"We are very pleased with what has been a strong first half of
2020 for SDX, despite the many challenges faced in the period.
Production hit record levels and we made some important discoveries
in both Egypt and Morocco, which have added significant value to
the Company's portfolio, with the Sobhi discovery, in which we have
a 100% working interest, expected to be brought on stream in Q1
2021. Our drilling success has also opened up new exploration
prospects that we expect to be of significant value to us. With
eight confirmed discoveries from our Egypt and Morocco drilling
campaigns and one well still to be tested, reduced G&A expenses
and a successful disposal, we have allocated capital with success
and discipline in the period.
We enter the second half of 2020 in a very strong position with
minimal upcoming capital commitments, a strong balance sheet, and a
portfolio of fixed and high price gas assets which will generate
significant free cash flow. We will continue to implement our
strategy for the remainder of the year, focusing on ways that we
can further grow the business, both organically and inorganically,
in the best interests of all stakeholders."
H1 2020 Operations Highlights
-- H1 2020 average entitlement production of 6,980 boe/d, an
increase of 97% from H1 2019 and 72% higher than average production
during FY 2019 (4,062 boe/d) due to strong production levels mainly
from South Disouq, which continued to perform ahead of expectations
at gross production of 49.7 MMscf/d of dry gas and 486 bbl/d of
condensate (52.6 MMscfe/d) equating to 4,825 boe/d net to SDX.
-- The South Disouq two-well drilling campaign was completed
during the period, with the second well, SD-12X (100% working
interest to SDX), being a commercial discovery in the Kafr el
Sheikh formation, and management estimating 24 bcf of recoverable
resources. Plans are underway to connect SD-12X to the Company's
gas processing plant via a 5.8km flow line to the Ibn Yunus-1X well
location with production expected in Q1 2021. Based upon well-test
data, it is anticipated that when connected, the well will produce
at a stabilised rate of 10-12 MMscf/d.
-- Following the success of SD-12X, management is looking to
high grade a number of additional, adjacent and now de-risked,
material prospects for drilling in the next two to three years.
-- Moroccan drilling campaign has resulted in seven discoveries
from nine wells drilled to date, with the tenth well, LMS-2,
completed and awaiting crew mobilisation for testing. Discoveries
at OYF-2 and BMK-1 confirm the prospectivity in SDX's existing core
production and development area extends to the north, and have
de-risked c.20 bcf of P50 prospective resources. All objectives of
the drilling campaign were achieved with 10 wells with the final
two wells deferred in order to preserve capital.
-- Following the drilling campaigns at South Disouq and Morocco,
SDX has incurred the majority of its planned capex for 2020.
-- Post-period end it was announced that the Company has sold
its 50% working interest in the non-core North West Gemsa ("NW
Gemsa") licence, situated in the Eastern Desert of Egypt for US$3.0
million, of which US$1.4 million was used to discharge the
Company's remaining liabilities on the licence. The net US$1.6
million proceeds exceeded management's expectations.
H1 2020 Financial Highlights
The table below reflects the results from the North West Gemsa
concession, which was held for sale as at 30 June 2020, as a
discontinued operation (as required by IFRS). All revenues, costs
and taxation from this asset have been consolidated into a single
line item "profit/(loss) from discontinued operations" in both
periods reported. Per unit metrics do not include North West
Gemsa.
Six months ended
30 June (unaudited)
US$ million except per unit 2020 2019
amounts
------------ ---------
Net revenues 22.0 15.5
------------ ---------
Netback(1) 17.2 12.5
------------ ---------
Net realised average oil service
fees - US$/barrel 30.18 50.57
------------ ---------
Net realised average Morocco
gas price - US$/mcf 10.35 10.28
------------ ---------
Net realised South Disouq gas 2.85 N/A
price - US$/mcf
------------ ---------
Netback - US$/boe 15.25 43.98
------------ ---------
EBITDAX(1) (2) 15.3 9.3
------------ ---------
Exploration & evaluation expense(3) (5.1) (0.6)
------------ ---------
Depletion, depreciation, and
amortisation (12.0) (7.9)
------------ ---------
Profit/(loss) from discontinued
operations 1.1 (0.1)
------------ ---------
Total comprehensive loss (4.0) (0.4)
------------ ---------
Capital expenditure 19.4 21.8
------------ ---------
Net cash generated from operating
activities(4) 10.0 4.3
------------ ---------
Cash and cash equivalents 9.3 11.2
------------ ---------
(1) Refer to the "Non-IFRS Measures" section of this release
below for details of Netback and EBITDAX.
(2) EBITDAX for H1 2020 includes US$2.7 million 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) US$4.5 million of non-cash Exploration & Evaluation
("E&E") write offs in total are included within this line
item.
(4) Excludes discontinued operations.
-- Netback: H1 2020 Netback of US$17.2 million, 38% higher than
H1 2019, was driven by a full half year of production above
expectations from South Disouq. This effect was partly offset by
lower production in Morocco due to COVID-19 shutdowns and lower
production in West Gharib due to increased water cut and lower oil
service fee realisations. Operating expenses were US$1.7 million
higher predominantly due to South Disouq starting up in November
2019. The lower per unit netback of US$15.25/boe in 2020 (2019:
US$43.98/boe) results from the contribution of South Disouq in 2020
which has high volume, lower netback production, versus 2019 which
did not include South Disouq and therefore reflected a higher
proportion of volumes from Morocco, which achieves high
netbacks.
-- EBITDAX: H1 2020 EBITDAX of US$15.3 million was 65% higher
than H1 2019 of US$9.3 million due to higher Netback, lower
recurring G&A expenses and lower transaction costs in 2020,
partly offset by a non-recurring stock-based compensation credit in
2019 following the departure of two senior employees.
-- Depletion, depreciation and amortisation ("DD&A"): H1
2020 DD&A charge was higher at US$12.0 million compared to
US$7.9 million in H1 2019 due to South Disouq start up in Q4 2019,
partly offset by a reduced charge in Morocco following 2P reserves
additions from the recent drilling campaign in Q4 2019/Q1 2020, and
lower production.
-- Non-cash E&E write offs: Charges totalling US$4.5 million
following the drilling of two sub-commercial wells, SD-6X in South
Disouq and SAH-5 in Morocco.
-- Operating cash flow (before capex, excluding discontinued
operations): H1 2020 operating cash flow (before capex, excluding
discontinued operations) of US$10.0 million, higher than H1 2019 of
US$4.3 million primarily due to the EBITDAX drivers discussed
above, as well as a reduction in accounts receivable during the
period.
-- Capex: H1 2020 capex of US$19.4 million, reflecting:
o US$12.2 million (including US$0.5 million of decommissioning
provisions) for the Moroccan drilling campaign, well tie-ins and
customer connections;
o US$6.0 million for the drilling of the SD-6X (SDX: 55%
interest) and SD-12X (SDX: 100% interest) wells in South Disouq
(including US$0.2 million of decommissioning provisions and a
US$0.3 million development lease bonus for the SD-12X
discovery);
o US$0.5 million for additional work and insurance spares at the
South Disouq Central Processing Facility ("CPF");
o US$0.5 million for drilling/workovers in West Gharib; and
o US$0.2 million for Morocco facilities and customer
connections
-- Liquidity: Closing cash as at 30 June 2020 was US$9.3 million
with the US$7.5 million EBRD credit facility remaining undrawn and
available up to 1 November 2020 at which point it will amortise to
US$2.5 million of availability.
-- Together with cash generated from operations, the Company is
fully funded for all of its planned activities in 2020 and
2021.
COVID-19 update
-- During the second half of March 2020 and into April 2020,
COVID-19 containment restrictions in Morocco temporarily impacted
our operations, with three customers being required to close their
operations. However, in early May these same customers re-started
production and as at 30 June 2020 had returned to approximately 60%
of their pre-closure consumption rates. Whilst some restrictions
have been eased, there remains uncertainty as to when production
will return to pre-COVID-19 levels and accordingly the Company is
revising its full year production guidance for the Moroccan
business to 5.3 - 6.0 MMscf/d (gross), from 6.7 - 6.9 MMscf/d
(gross). Previously the Company had highlighted that should the
three customers remain closed down for three months, then FY 2020
guidance would be revised to 5.7 - 6.2 MMscf/d (gross) and if the
close down extends to six months, then the guidance would be
revised to 5.0 - 5.5 MMscf/d (gross). Gross consumption for H1 2020
was 5.7 MMscf/d and the bottom end of the updated guidance of 5.3 -
6.0 MMscf/d (gross) reflects the potential risk of further
shutdowns in H2 2020 if a second spike of COVID-19 infections
occur. Egyptian production remains unaffected by COVID-19 at
present. The Company continues to follow applicable government
guidance in each of its territories.
2020 Guidance
-- 2020 production guidance has been revised to take account of
the disposal of NW Gemsa and the impact of COVID-19 on production
in Morocco. As such, the Company's revised 2020 full year guidance
is set at 6,000 - 6,250 boe/d (original guidance of 6,750 - 7,000
boe/d). The revised 2020 production guidance is 48-54% higher than
2019 actual production.
-- 2020 capex guidance has been revised down to US$26.2 million
from US$28.2 million as per the Company's Q1 2020 operating and
financial results provided on 20 May 2020. The revision reflects
the removal of US$2.0 million of budgeted NW Gemsa workover costs
that will not be incurred by the Company following the sale of the
asset.
Outlook
-- The Company is well-placed to weather the current
macroeconomic uncertainties and continues to screen a number of
business development opportunities.
-- Cash generation is expected to continue strongly in the
second half of 2020 as approximately 90% of the Company's cash
flows are expected to be generated from fixed-price gas
businesses.
-- 2020 and 2021 work programmes are fully funded.
-- The Company continues to assess the optimum use of its
capital, whether that be investment into new projects or returning
cash to shareholders. At present it is felt that continued
investment into new projects is the optimum use of the Company's
capital, however this will be assessed on an ongoing basis.
Operations Update
H1 2020 Production and Full Year Guidance
-- H1 2020 actual entitlement production of 6,980 boe/d, an
increase of 97% from H1 2019, with South Disouq and West Gharib
exceeding guidance. Full year guidance has been revised to
approximately 6,000 - 6,250 boe/d from 6,750 - 7,000 boe/d to
reflect the disposal of the non-core NW Gemsa concession and lower
consumption expectations in Morocco which has been impacted by
COVID-19 shutdowns. Given this, our revised full year guidance for
Morocco is 5.3 - 6.0 MMscf/d which is representative of actual
production achieved in H1 2020 (original guidance of 6.7 - 6.9
MMscf/d). An analysis of production by asset is as follows:
Gross production SDX entitlement production
Asset Actual - 6 Guidance Guidance Actual Actual
months ended - 12 months - 12 months 6 months 6 months
30 June 2020 ended 31 December ended 31 ended 30 ended 30
2020 December June 2020 June 2019
2020
-------------------- -------------------- ------------- ----------- -----------
Core assets
-------------------- -------------------- ------------- ----------- -----------
South Disouq - WI 4,300 -
55% 52.6 MMscfe/d 47 - 49 MMscfe/d 4,460 4,825 -
-------------------- -------------------- ------------- ----------- -----------
West Gharib - WI 3,200 - 3,300
50% 3,395 bbl/d bbl/d 610 - 630 647 822
-------------------- -------------------- ------------- ----------- -----------
5.3 - 6.0
Morocco - WI 75% 5.7 MMscf/d MMscf/d 663 - 750 707 745
-------------------- -------------------- ------------- ----------- -----------
Non-core assets
-------------------- -------------------- ------------- ----------- -----------
N/A - now
NW Gemsa - WI 50% N/A - now disposed disposed 385 769 1,972
-------------------- -------------------- ------------- ----------- -----------
South Ramadan -
WI 12.75 % 251 boe/d - 42 32 -
-------------------- -------------------- ------------- ----------- -----------
6,000 -
Total 6,267 6,980 3,539
------------- ----------- -----------
o South Disouq (W.I. 55%) : The South Disouq asset has performed
above expectations during H1 2020, with all four wells flowing
ahead of expected rates and the CPF achieving higher than planned
levels of uptime. During Q2 2020, a well testing program was
carried out as part of scheduled reservoir management activities.
Scheduled CPF maintenance is planned for Q3 2020 and one of the
four wells, SD-4X, will be produced at lower rates during H2 2020
until a planned workover to reduce water production, as a result of
poor cement job when the well was originally completed, is carried
out in Q1 2021 after SD-12X (SDX W.I. 100%) has been brought on
stream. Notwithstanding the above, the Company re-iterates its full
year guidance of gross production of 47 - 49 MMscfe/d.
o West Gharib (W.I. 50%): A new production well, Rabul-3, was
successfully drilled, completed and tied into the field production
system during H1 2020. Although the existing well stock experienced
increasing water cut during the half year, production in the period
was higher than guidance albeit lower than the same period in 2019.
Given the above, the Company re-iterates its full year guidance of
gross production of 3,200 - 3,300 bbl/d for 2020.
o Morocco (W.I. 75%): As previously reported, following a period
of strong demand in January and February, three customers
accounting for 50% of normal daily consumption were required to
close between mid-March and early May due to COVID-19 restrictions
imposed by the Government of Morocco. Since the recommencement of
production, these customers have gradually increased their
consumption to c.60% of pre-closure levels, which is constrained by
ongoing virus containment measures. The situation in-country
remains uncertain and as a result, guidance for this business for
FY 2020 has been revised from 6.7 - 6.9 MMscf/d to 5.3 - 6.0
MMscf/d.
o NW Gemsa (W.I. 50%): The Company sold its 50% working interest
in this asset in July 2020, with an effective date of 1 April 2020.
Gross production to 31 March 2020 was 3,076 boe/d (1,538 boe/d net
to SDX), which equates to equivalent actual entitlement production
to the Company of 769 boe/d for H1 2020 and 385 boe/d for the full
year. Prior to its sale, the field exceeded expectations, primarily
due to a slower rate of pressure depletion and water cut
increase.
o South Ramadan (W.I. 12.75%): South Ramadan, situated offshore
in the Gulf of Suez, commenced production in Q2 2020 at
approximately gross 350 bbl/d. Post completion of an acid
stimulation operation, production is expected to stabilise during
H2 2020 at gross 400 - 500 bbl/d.
2020 Drilling and Operations
Morocco drilling campaign update (SDX 75% working interest)
-- Two close to infrastructure appraisal/development wells were
drilled in Q1 2020. The first well, SAH-5, encountered
sub-commercial volumes of gas and was plugged and abandoned. The
second well, SAH-3, was drilled to a measured depth of 1,129 metres
and encountered 5.5 metres of gas sands across two intervals.
Management estimates that approximately 0.5 bcf is recoverable from
this well, which is expected to be tied into production
infrastructure later in 2020 to support customer demand.
-- Two subsequent step-out exploration wells, OYF-2 and BMK-1,
have confirmed that the Company's core productive area extends to
the north. The OYF-2 well intersected both pre-drill targets in the
Upper and Lower Guebbas horizons, and has been successfully tested.
Management estimates that 1.3-1.9 bcf of gas is recoverable from
the horizons encountered at OYF-2. The BMK-1 well, further to the
north, also encountered gas in both the Upper and Lower Guebbas
horizons, albeit due to downhole issues only the former could be
logged and completed. Management estimates that 0.9 bcf of gas is
recoverable from both of these horizons. The BMK-1 well will be
tested in the coming months once COVID-19 restrictions have been
lifted.
-- Significantly, the OYF-2 and BMK-1 wells have de-risked up to
20 bcf of adjacent P50 prospective resources for future drilling,
of which approximately 10 bcf is located in and around BMK-1.
-- The final well of the campaign, LMS-2 well in the Lalla
Mimouna concession, encountered a 10.6 metre net gas reservoir with
30.9% porosity. The LMS-2 gas has a different thermogenic
composition from the gas in our core productive area which suggests
that it is from a new, and likely deeper, source rock. The well has
been cased and completed and it will be perforated and tested to
determine its potential when changes to COVID-19 restrictions make
it possible to bring a well testing crew into the country.
-- Following the play-opening discoveries made during the
campaign, the Company is undertaking an analysis to optimise tie-in
costs and future drilling activity in this new area.
-- Having fulfilled the objectives for the Morocco campaign,
being: (i) to add 2P reserves in and around its existing
infrastructure; (ii) to determine if its existing producing area
extends to the north; and (iii) to test the prospectivity within
the Lalla Mimouna concession, the Company decided not to drill the
final two planned wells. As these last two wells would not have
been immediately tied into the Company's infrastructure or
contributed cash flows in the near term, the Company has chosen to
preserve its capital and postpone, at no incremental cost, these
last two wells for a future campaign.
-- 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)
-- Having concluded well planning in late Q4 2019, the SD-6X
(Salah) well was drilled in Q1 2020, to a total depth of 3,167
metres. The well encountered 1.7 metres of net gas bearing sand in
the Kafr El Sheikh Formation (average porosity 34%), 1.0 metre of
net gas bearing sand in the Abu -- Madi Formation which has 143
metres of high quality net reservoir (average porosity 24%) and 258
metres of high quality net reservoir in the Qawasim Formation
(average porosity 20%). The gas sands in both the Kafr El Sheikh
and Abu Madi were deemed to be sub-economic and the Qawasim had low
gas saturation. The thinner than expected gas columns encountered
in SD-6X were attributable to the absence of a sealing mechanism in
the stratigraphic traps being targeted by the well.
-- The rig then moved to the site of the next drilling location,
the SD-12X (Sobhi) exploration well, and was spud on 18 March 2020.
The well was drilled to a measured depth of 2,415 metres,
encountering 36 metres net of high-quality gas-bearing sands, with
an average porosity of 20%, near the base of the Kafr El Sheikh
("KES") formation. The top of the KES sand was encountered at a
measured depth of 2,169 metres. Management's best estimate is that
the well has encountered approximately 24 bcf of recoverable gas
resources which is significantly in excess of the minimum
commercial volume of approximately 8 bcf.
-- Subsequently, the Company conducted a drill stem test (DST)
in April 2020 during which, following clean-up and a shut-in
period, a maximum rate of 25 MMscf/d on a 54/64" choke was recorded
during the main flowing period. This initial flow test was followed
by a three hour period flowing at a stable rate of 15 MMscf/d on a
28/64" choke and then a further four hours flowing at a stable rate
of 10 MMscf/d on a 16/64" choke. The well was then shut in for a
12-hour build-up period during which pressure continued to increase
back to pre-test levels. After the DST the well was completed with
a gravel-pack and an extended well test ("EWT") conducted. During
the EWT the well was flowed at rates of 9, 13 and 15 MMscf/d for
12, 8 and 28 hours at 25/64", 36/64" and 44/64" choke respectively.
The well performance and EWT test data suggested that, when
completed, the well will produce at an optimum stabilised rate of
10-12 MMscf/d which is in line with the nearby Ibn Yunus-1X
producing well. The well is expected to produce mostly dry gas.
-- Management expects that the Sobhi well will be tied in during
2020/21 via a 5.8 kilometre connection to the Ibn Yunus-1X location
where an existing flow-line connects down to the South Disouq CPF.
On a gross basis, the tie-in cost is estimated at US$3.5 million.
The discovery will potentially only require one further development
well to be drilled, which will not be necessary for another two to
three years. SDX drilled the Sobhi well at a 100% working interest
and the total cost of the well, including the cost to complete and
test, was US$4.0 million. Management expects the Sobhi well to
commence production in Q1 2021 when the SD-4X well is taken offline
for a workover.
-- The Company's partner has confirmed that, due to the premium
that would be payable if it exercised its back-in rights under the
Joint Operating Agreement, it will not participate in the
development of the Sobhi discovery.
-- Post the discovery at SD-12X, SDX has been undertaking a
review of remaining prospectivity in the South Disouq acreage
identifying material low-risk prospects. The work has focussed on,
but has not been restricted to, the now de-risked basal Kafr el
Sheikh play, with a number of features having been identified and
advanced to prospect status. The basal Kafr el Sheikh play has so
far been identified to contain approximately 73bcf recoverable
volumes (management estimate) with a number of additional
significant features yet to be fully defined. During the review
process, leads and prospects have been identified in other plays
that have been proven to exist in either the South Disouq
concession or in adjacent acreage. Additional features have been
identified in the shallow Kafr el Sheikh horizon, leads in the 10
to 20bcf recoverable range have been identified in the Abu Madi
play and prospects and leads are being analysed in a "buried hill"
play that is analogous to producing fields in adjacent acreage.
With the buried hill play, one feature has been worked to prospect
status and is estimated to contain approximately 23bcf recoverable
volumes (management estimate). Other, similar sized buried hill
features have been identified plus one much larger feature and
these are currently being worked to prospect status. Negotiations
are underway with the Egyptian authorities for an extension of the
existing licences to enable SDX to pursue the material
opportunities that have been identified.
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 CPFs at West
Gharib and clean-up, the well has produced at the expected average
stabilised rate of approximately 300 bbl/d.
2020 Capex Guidance
-- 2020 capex guidance has been revised down to US$26.2 million
from US$28.2 million as per the Company's Q1 2020 operating and
financial results provided on 20 May 2020. The revision reflects
the removal of US$2.0 million of budgeted NW Gemsa workover costs
that will not be incurred by the Company following the sale of the
asset. Guidance for all other assets is maintained, however the
Company will continue to exercise prudent capital discipline when
evaluating expenditure for the remainder of this year, particularly
given current macroeconomic circumstances.
-- These points are explained further in the following analysis
of the revised US$26.2 million 2020 capex guidance.
o US$10.7 million at South Disouq which is for the drilling of
two exploration wells (SD-6X: SDX 55% interest and SD-12X: SDX 100%
interest), the tie in costs for the successful SD-12X well to the
CPF (SDX 100% interest), well workovers, CPF equipment spares and a
deposit on the booster compressor planned for South Disouq in 2021.
Capex incurred as at 30 June 2020 represents the dry-hole cost of
the non-commercial SD-6X well, the costs of drilling, completing
and testing the SD-12X discovery well (including decommissioning
provision and development bonus) and equipment spares for the
CPF;
o US$2.0 million for up to three appraisal/development wells in
West Gharib; and
o US$13.5 million covering the Morocco drilling campaign, which
completed in March, and new well connections and customer
infrastructure which are expected to be incurred in H2 2020.
Asset Guidance - Actual - 6
12 months ended months ended
31 December 30 June 2020
2020
Core assets
----------------- -------------------
South Disouq - US$10.7 million US$6.5 million(1)
WI 55%
----------------- -------------------
West Gharib - WI US$2.0 million US$0.5 million
50%
----------------- -------------------
Morocco - WI 75% US$13.5 million US$12.4 million(2)
----------------- -------------------
Non-core asset
----------------- -------------------
NW Gemsa - WI 50% US$nil million US$nil million
----------------- -------------------
Total US$26.2 million US$19.4 million
----------------- -------------------
(1) Includes US$0.2 million of non-cash decommissioning
provisions
(2) Includes US$0.5 million of non-cash decommissioning
provisions
H1 2020 Financial Update
-- Netback for the six months to 30 June 2020 was US$17.2
million, 38% higher than the Netback of US$12.5 million for the six
months to 30 June 2019, driven by:
o Net revenue increase of US$6.5 million due to:
o US$10.6 million of South Disouq revenue, following production
start up in Q4 2019 offset by;
o US$3.9 million lower revenue at West Gharib due to lower
realised service fees (H1 2020: US$30.19/bbl, H1 2019:
US$50.57/bbl) and lower production (H1 2020: 647 bbl/d, H1 2019:
822 bbl/d); and
o US$0.3 million lower revenue in Morocco due to decreased
production caused by shutdowns required by COVID-19 restrictions
(H1 2020: 707 boe/d, H1 2019: 745 boe/d)
o Operating costs increasing by US$1.7 million from prior period
due to the commencement of production at South Disouq and South
Ramadan, partly offset by lower costs at each of the other
assets.
-- EBITDAX for the six months to 30 June 2020 was US$15.3
million, US$6.0 million (65%) higher than EBITDAX of US$9.3 million
for the six months to 30 June 2019, due to higher Netback and lower
G&A expenses due to the absence in 2020 of transaction costs
associated with the Company's redomicile to the UK in 2019 and
redundancy costs for two senior employees who left in Q2 2019.
-- The main components of SDX's comprehensive loss of US$4.0
million for the six months ended 30 June 2020 are:
o US$17.2 million Netback;
o US$5.1 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$0.6 million relates to ongoing new venture activity.
o US$12.0 million of DD&A expense reflects increased charges
due to South Disouq start up in Q4 2019, partly offset by a lower
charge in Morocco following 2P reserve additions from Q4 2019/Q1
2020 drilling;
o US$2.0 million of ongoing G&A expense, including US$0.1
million of transaction costs associated with the disposal of NW
Gemsa;
o US$2.7 million of Egyptian corporation tax for South Disouq;
and
o US$1.1 million profit from discontinued operations
representing the result from the NW Gemsa field up to 31 March 2020
prior to its sale.
Operating cash flow (before capex, excluding discontinued
operations)
-- Operating cash flow (before capex, excluding discontinued
operations): H1 2020 operating cash flow (before capex, excluding
discontinued operations) of US$10.0 million, higher than H1 2019 of
US$4.3 million primarily due to the EBITDAX drivers discussed
above, as well as a reduction in accounts receivable during the
period.
CAPEX
-- US$19.4 million of capital expenditure has been invested into
the business during the six months to 30 June 2020:
o US$12.2 million (including US$0.5 million of decommissioning
provisions) for the Moroccan drilling campaign;
o US$6.0 million for the drilling of the SD-6X (SDX: 55%
interest) and SD-12X (SDX: 100% interest) wells in South Disouq
(including US$0.2 million of decommissioning provisions and a
US$0.3 million development lease bonus for the SD-12X
discovery);
o US$0.5 million for additional work and insurance spares at the
South Disouq CPF;
o US$0.5 million for drilling and workovers in West Gharib;
and
o US$0.2 million for Morocco facilities and customer
connections.
Liquidity update
-- Closing cash as at 30 June 2020 was US$9.3 million with the
US$7.5 million EBRD credit facility remaining undrawn. In April,
the Company and EBRD agreed a waiver from the scheduled
amortisation of the facility which was due on 1 May 2020. The
waiver resulted in availability remaining at US$7.5 million up
until 1 November 2020 rather than reducing to US$5.0 million.
-- The Company is in discussions with the EBRD to extend the
tenor and re-establish the full availability of the US$10 million
credit facility.
Corporate update
-- The Company is well-placed to weather the current
macroeconomic uncertainties and continues to screen a number of
business development opportunities.
-- In the period SDX announced the appointment of Catherine
Stalker as independent non-executive Director effective 6 February
2020.
KEY FINANCIAL & OPERATING HIGHLIGHTS
Six months ended
30 June
-------------------------------- -------------------- -------------
2020 2019
$000s except per unit amounts (unaudited) (unaudited)
-------------------------------- ------ -------------
FINANCIAL
-------------------------------- ------ -------------
Gross revenues 27,095 15,843
Royalties (5,144) (356)
Net Revenues 21,951 15,487
Operating costs (4,709) (3,014)
Netback (1) 17,242 12,473
EBITDAX (1) 15,327 9,311
Total comprehensive loss (3,954) (354)
Net loss per share - basic $(0.019) $(0.002)
Cash, end of period 9,275 11,195
Capital expenditures 19,375 21,818
Total assets 129,246 140,112
Shareholders' equity 94,390 115,346
Common shares outstanding
(000's) 204,723 204,723
OPERATIONAL
-------------
NW Gemsa sales (bbl/d) 769 1,972
West Gharib production service
fee (bbl/d) 647 822
South Disouq gas sales (boe/d) 4,557 -
Morocco gas sales (boe/d) 707 745
Other products sales (boe/d) 300 -
-------------------------------- ------ ------------- -------------
Total sales volumes (boe/d) 6,980 3,539
---------------------------------------- ------------- -------------
Realised West Gharib service
fee (US$/bbl) $30.18 $50.57
Realised South Disouq gas
price (US$/mcf) $2.85 -
Realised Morocco gas price
(US$/mcf) $10.35 $10.28
Royalties ($/boe) $4.98 $1.26
Operating costs ($/boe) $4.17 $10.63
Netback ($/boe) (1) $15.25 $43.98
(1) Refer to the "Non-IFRS Measures" section of this release
below for details of Netback and EBITDAX.
Condensed Consolidated Balance Sheet
(US$'000s) As at 30 June 2020 As at 31 December
2019
----------------- -------------------------------------------- --------------------------------------------
Assets
Cash and cash
equivalents 9,275 11,054
Trade and other 16,336 21,774
receivables
Held-for-sale 807 -
assets
Inventory 7,824 7,972
----------------- -------------------------------------------- --------------------------------------------
Current assets 34,242 40,800
Investments 3,477 3,916
Property, plant, 61,476 67,895
and
equipment
Exploration and 28,369 18,720
evaluation
assets
Right-of-use 1,682 1,687
assets
------------------ --------------------------------------------
Non-current assets 95,004 92,218
Total assets 129,246 133,018
------------------ --------------------------------------------
Liabilities
Trade and other 26,213 25,982
payables
Decommissioning 328 317
liability
Current income 244 1,484
taxes
Lease liability 550 506
------------------ -------------------------------------------- --------------------------------------------
Current 27,335 28,289
liabilities
Decommissioning 6,064 5,287
liability
Deferred income 290 290
taxes
Lease liability 1,167 1,121
------------------ --------------------------------------------
Non-current 7,521 6,698
liabilities
Total liabilities 34,856 34,987
------------------ --------------------------------------------
Equity
Share capital 2,593 2,593
Share-based payment 7,351 7,038
reserve
Accumulated other (917) (917)
comprehensive
loss
Merger reserve 37,034 37,034
Retained earnings 48,329 52,283
Total equity 94,390 98,031
------------------ --------------------------------------------
Equity and
liabilities 129,246 133,018
------------------ --------------------------------------------
Condensed Consolidated Statement of Comprehensive Income
Six months ended 30 June
(US$'000s) 2020 2019
----------------------------------------------- -------------------------- -------------------------
Revenue, net of royalties 21,951 15,487
Direct operating expense (4,709) (3,014)
Gross profit 17,242 12,473
Exploration and evaluation expense (5,099) (615)
Depletion, depreciation, and amortisation (11,973) (7,884)
Stock-based compensation (313) 339
Share of profit from joint venture 384 724
General and administrative expenses
- Ongoing general and administrative expenses (1,918) (3,121)
- Transaction
costs (68) (1,104)
------------------------------------------------- -------------------------- -------------------------
Operating (loss)/income (1,745) 812
Finance costs (276) (245)
Foreign exchange
loss (301) (42)
(Loss)/income before income taxes (2,322) 525
Current income tax
expense (2,746) (758)
Profit/(loss) from discontinued operations 1,114 (121)
Loss and total comprehensive loss for
the period (3,954) (354)
--------------------------------------------------- -------------------------- -------------------------
Net loss per
share
Basic $(0.019) $(0.002)
Diluted $(0.019) $(0.002)
----------------------------------------------- -------------------------
Condensed Consolidated Statement of Changes in Equity
Six months ended 30 June
(US$'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)
----------------------------------- --------------------------------- ---------------------------------
Balance, end of period 2,593 2,593
Share-based payment
reserve
Balance, beginning of
period 7,038 6,860
Share-based compensation for
the period 313 (339)
------------------------------------- --------------------------------- ---------------------------------
Balance, end of period 7,351 6,521
Accumulated other comprehensive
loss
Balance, beginning of
period (917) (917)
Balance, end of period (917) (917)
Merger reserve
Balance, beginning of 37,034 -
period
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)/income
for the period (3,954) (354)
-------------------------------------- --------------------------------- ---------------------------------
Balance, end of period 48,329 70,115
Total equity 94,390 115,346
----------------------------------- ---------------------------------
Condensed Consolidated Statement of Cash Flows
Six months ended 30 June
(US$'000s) 2020 2019
-------------------------------------------- ----------------------------- -----------------------------
Cash flows generated from/(used in) operating
activities
(Loss)/income before income taxes (2,322) 525
Adjustments for:
Depletion, depreciation, and amortisation 11,973 7,884
Exploration and evaluation expense 4,527 -
Finance expense 276 245
Stock-based compensation charge/(credit) 313 (339)
Foreign exchange loss/(gain) 457 (226)
Tax paid by state (2,695) -
Share of profit from joint venture (384) (724)
---------------------------------------------- ----------------------------- -----------------------------
Operating cash flow before working capital
movements 12,145 7,365
Decrease/(increase) in trade and other
receivables 978 (2,320)
(Decrease)/Increase in trade and other
payables (528) 1,440
Payments for inventory (1,422) (854)
-----------------------------
Cash generated from operating activities 11,173 5,631
Income taxes paid (1,135) (1,303)
--------------------------------------------- ----------------------------- -----------------------------
Net cash generated from operating activities 10,038 4,328
Cash generated from discontinued operations 4,462 8,476
Cash flows generated from/(used in) investing
activities:
Property, plant, and equipment expenditures (5,625) (4,022)
Exploration and evaluation expenditures (11,593) (14,494)
Advance proceeds from NW Gemsa sale 1,000 -
Dividends received 774 639
-----------------------------
Net cash used in investing activities (15,444) (17,877)
Cash used in investing activities of
discontinued
operations - (791)
Cash flows generated from/(used in) financing
activities:
Payments of lease liabilities (308) (418)
Finance costs paid (70) (58)
--------------------------------------------- ----------------------------- -----------------------------
Net cash used in financing activities (378) (476)
Decrease in cash and cash equivalents (1,322) (6,340)
Effect of foreign exchange on cash and
cash equivalents (457) 190
Cash and cash equivalents, beginning
of period 11,054 17,345
----------------------------------------------- ----------------------------- -----------------------------
Cash and cash equivalents, end of period 9,275 11,195
----------------------------------------------- -----------------------------
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
three producing assets: a 55% operated interest in the South Disouq
gas field in the Nile Delta, a 50% non-operated interest in the
West Gharib concession, which is located onshore in the Eastern
Desert, adjacent to the Gulf of Suez, and a 12.75% non-operated
interest in the South Ramadan concession offshore 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
Simon Mensley
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: 20 August 2020
Time: 3:00pm BST
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: 96180579#
The presentation is available our website; https://www.sdxenergy.com/investors/results-centre/
Glossary
"bbl" stock tank barrel
"bbl/d" barrels of oil per day
------------------------------
"bcf" billion cubic feet
------------------------------
"boe/d" barrels of oil equivalent per
day
------------------------------
"Mcf" thousands of cubic feet
------------------------------
"MMscf/d" million standard cubic feet
per day
------------------------------
"MMscfe/d" million standard cubic feet
equivalent per day
------------------------------
"2P" proved plus probable reserves
------------------------------
Forward-looking information
Certain statements contained in this press release may
constitute "forward-looking information" as such term is used in
applicable Canadian securities laws. Any statements that express or
involve discussions with respect to predictions, expectations,
beliefs, plans, projections, objectives, assumptions or future
events or are not statements of historical fact should be viewed as
forward-looking information. In particular, statements regarding
the Company's 2020 production and capex guidance, liquidity and
sources of cash flows in 2020 and 2021, the sufficiency of reserves
to fulfill existing customer contracts, the impact of COVID-19 on
customer consumption, future drilling developments and results, and
extending the tenor and re-establishing the full availability of
the US$10 million credit facility with the EBRD should all be
regarded as forward-looking information.
The forward-looking information contained in this document is
based on certain assumptions, and although management considers
these assumptions to be reasonable based on information currently
available to them, undue reliance should not be placed on the
forward-looking information because SDX can give no assurances that
they may prove to be correct. This includes, but is not limited to,
assumptions related to, among other things, commodity prices and
interest and foreign exchange rates; planned synergies, capital
efficiencies and cost - savings; applicable tax laws; future
production rates; receipt of necessary permits; the sufficiency of
budgeted capital expenditures in carrying out planned activities,
and the availability and cost of labour and services.
All timing given in this announcement, unless stated otherwise,
is indicative, and while the Company endeavours to provide accurate
timing to the market, it cautions that, due to the nature of its
operations and reliance on third parties, this is subject to
change, often at little or no notice. If there is a delay or change
to any of the timings indicated in this announcement, the Company
shall update the market without delay.
Forward-looking information is subject to certain risks and
uncertainties (both general and specific) that could cause actual
events or outcomes to differ materially from those anticipated or
implied by such forward - looking statements. Such risks and other
factors include, but are not limited to, political, social, and
other risks inherent in daily operations for the Company, risks
associated with the industries in which the Company operates, such
as: operational risks; delays or changes in plans with respect to
growth projects or capital expenditures; costs and expenses;
health, safety and environmental risks; commodity price, interest
rate and exchange rate fluctuations; environmental risks;
competition; permitting risks; the ability to access sufficient
capital from internal and external sources; and changes in
legislation, including but not limited to tax laws and
environmental regulations. Readers are cautioned that the foregoing
list of risk factors is not exhaustive and are advised to refer to
the Principal Risks & Uncertainties section of SDX's Annual
Report for the year ended 31 December 2019, which can be found on
SDX's SEDAR profile at www.sedar.com , for a description of
additional risks and uncertainties associated with SDX's
business.
The forward-looking information contained in this press release
is as of the date hereof and SDX does not undertake any obligation
to update publicly or to revise any of the included forward --
looking information, except as required by applicable law. The
forward -- looking information contained herein is expressly
qualified by this cautionary statement.
Non-IFRS Measures
This news release contains the terms "Netback," and "EBITDAX"
which are not recognized measures under IFRS and may not be
comparable to similar measures presented by other issuers. The
Company uses these measures to help evaluate its performance.
Netback is a non-IFRS measure that represents sales net of all
operating expenses and government royalties. Management believes
that netback is a useful supplemental measure to analyze operating
performance and provide an indication of the results generated by
the Company's principal business activities prior to the
consideration of other income and expenses. Management considers
netback an important measure as it demonstrates the Company's
profitability relative to current commodity prices. Netback may not
be comparable to similar measures used by other companies.
EBITDAX is a non-IFRS measure that represents earnings before
interest, tax, depreciation, amortization, exploration expense and
impairment. EBITDAX is calculated by taking operating income/(loss)
and adjusted for the add-back of depreciation and amortization,
exploration expense and impairment of property, plant and equipment
(if applicable). EBITDAX is presented in order for the users to
understand the cash profitability of the Company, which excludes
the impact of costs attributable to exploration activity, which
tend to be one-off in nature, and the non-cash costs relating to
depreciation, amortization and impairments. EBITDAX may not be
comparable to similar measures used by other companies.
Oil and Gas Advisory
Certain disclosures in this news release constitute "anticipated
results" for the purposes of National Instrument 51-101 - Standards
of Disclosure for Oil and Gas Activities ("NI 51-101") of the
Canadian Securities Administrators because the disclosure in
question may, in the opinion of a reasonable person, indicate the
potential value or quantities of resources in respect of the
Company's resources or a portion of its resources. Without
limitation, the anticipated results disclosed in this news release
include estimates of volume, flow rate, production rates, porosity,
and pay thickness attributable to the resources of the Company.
Such estimates have been prepared by Company management and have
not been prepared or reviewed by an independent qualified reserves
evaluator or auditor. Anticipated results are subject to certain
risks and uncertainties, including those described above and
various geological, technical, operational, engineering,
commercial, and technical risks. In addition, the geotechnical
analysis and engineering to be conducted in respect of such
resources is not complete. Such risks and uncertainties may cause
the anticipated results disclosed herein to be inaccurate. Actual
results may vary, perhaps materially.
Use of the term "boe" or the term "MMscf" may be misleading,
particularly if used in isolation. A "boe" conversion ratio of 6
Mcf: 1 bbl and a "Mcf" conversion ratio of 1 bbl: 6 Mcf are based
on an energy equivalency conversion method primarily applicable at
the burner tip and does not represent a value equivalency at the
wellhead.
Prospective Resources Data
The prospective resources estimates disclosed or referenced
herein have been prepared by Dr. Rob Cook, a qualified reserves
evaluator, in accordance with the SPE's Canadian Oil and Gas
Evaluation Handbook and in accordance with NI 51-101. The
prospective resources disclosed herein have an effective date of 1
January 2020. Prospective resources are those quantities of gas,
estimated as of the given date, to be potentially recoverable from
undiscovered accumulations through future development projects. As
prospective resources, there is no certainty that any portion of
the resources will be discovered. The chance that an exploration
project will result in a discovery is referred to as the "chance of
discovery" as defined by the management of the Company.
There is no certainty that it will be commercially viable to
produce any portion of the resources discussed herein; though any
discovery that is commercially viable would be tied back to the
Company's pipeline in Morocco and then connected to customers'
facilities within 9 to 12 months of discovery. Based upon the
economic analysis undertaken on any discovery, management has
attributed an associated chance of development of 100%.
There are uncertainties associated with the volume estimates of
the prospective resources disclosed herein, due to the level of
information available on prospective resources, but ranges are
defined based on data from the Company's nearby existing analogous
wells. Some of the risks and uncertainties are outlined below:
-- Petrophysical parameters of the sand/reservoir;
-- Fluid composition, especially heavy end hydrocarbons;
-- Accurate estimation of reservoir conditions (pressure and temperature);
-- Reservoir drive mechanism;
-- Potential well deliverability; and
-- The thickness and lateral extent of the reservoir section,
currently based on 3D seismic data.
"P50" means that there is at least a 50% probability that the
quantities actually recovered will equal or exceed the best
estimate.
This information is provided by RNS, the news service of the
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.
END
IR FFFLFTEIALII
(END) Dow Jones Newswires
August 20, 2020 02:00 ET (06:00 GMT)
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