TIDMSDX
RNS Number : 5068A
SDX Energy PLC
22 January 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.
22 January 2020
SDX ENERGY PLC ("SDX" or the "Company")
PROVIDES AN OPERATIONS AND FINANCIAL UPDATE AND GUIDANCE FOR
2020
SDX Energy Plc (AIM: SDX), the MENA-focused oil and gas company
provides a year end 31 December 2019 operations and financial
update and sets out production and capex guidance for 2020. All
monetary values are expressed in United States dollars net to the
Company unless otherwise stated.
Production and Capex: 2019 Year End Update and 2020 Guidance
-- 2019 production at 4,020 boe/d was 12% higher than 2018, and
by individual asset, has either exceeded or was at the upper end of
2019 guidance.
-- 2020 production guidance of 6,750 - 7,000 boe/d is 68-74%
higher than 2019 production. Guidance includes 1,000 - 1,050 boe/d
for North West Gemsa which the Company may exit during the year if
sufficient cost savings cannot be achieved by the operator.
-- 2019 capex of approximately US$40.7 million (unaudited),
US$4.5 million higher than 2019 guidance primarily due to two extra
wells being drilled in Morocco with the campaign starting earlier
in Q4'19 and rig move times between wells being shorter than
expected.
-- 2020 capex guidance of US$25.5 million predominantly relates
to the completion of the Morocco 12 well drilling campaign, two
exploration wells planned for South Disouq, Egypt, and up to three
appraisal/development wells planned for the Meseda and Rabul fields
in the West Gharb concession.
Morocco drilling campaign update (SDX 75% Working Interest)
-- Seven 'close to infrastructure' appraisal/development wells
have been drilled to date in the 12 well campaign resulting in five
commercial discoveries. The Company estimates that this has added
2.0 - 2.5 bcf (gross) to its estimate of existing gross gas
reserves of 4.0 - 5.0 bcf in Morocco. Given low connection costs,
and assuming continued well deliverability, the Company estimates
that these reserves will be sufficient to fulfil existing customer
contracts for the next 30 to 36 months.
-- The Company expects to add incremental reserves and
contingent resources from the remaining five wells in the campaign
and through future development of its acreage. These five wells
consist of: two play-opening appraisal wells to determine whether
the prospectivity of the Company's core area extends to the north;
two exploration wells in Lalla Mimouna targeting deeper
prospectivity in a potential new play fairway; and one 'close to
infrastructure' appraisal/development well.
South Disouq Egypt exploration drilling campaign update (SDX 55%
working interest)
-- At South Disouq in Egypt, preparations continue for two
exploration wells targeting the same horizons encountered in the
Company's four discoveries to date. SDX's share of these well costs
is estimated at US$4.0 million in total and this is fully funded
from its existing cash resources.
-- The first well, Salah, which is expected to spud in mid/late
February and complete in April 2020, is targeting a gross unrisked
P50 prospect of 71 bcfe (Company estimate). The second well, Sobhi,
which is expected to spud in late April/early May and complete in
early June, is targeting a gross unrisked P50 prospect of 33 bcfe
(Company estimate).
-- If successful, these two wells would require short, 8.0
kilometre and 5.8 kilometre, tie-ins to the South Disouq Central
Processing Facility ("CPF") with SDX's share of the tie-in cost
estimated at US$2.5 million and US$1.9 million respectively.
-- The Company is reviewing a number of development concepts
depending on the size of any discovery that is made. To fully
produce the gross unrisked P50 prospect of 71 bcfe targeted in the
first well, two further development wells are likely to be
required. With the gross unrisked P50 prospect of 33 bcfe targeted
in the second well, only one further development well would be
required.
-- Depending on partnering discussions, a third South Disouq
well targeting deeper prospectivity in a potential new play fairway
may be drilled later in 2020.
Cash and liquidity update
-- Closing cash as at 31 December 2019 was approximately US$11
million (unaudited) with the US$10 million European Bank for
Reconstruction and Development ("EBRD") credit facility remaining
undrawn. The facility amortised in November 2019 and it currently
has US$7.5 million available for drawdown. Discussions are underway
with EBRD to extend the tenor and re-establish the US$10 million
availability under the facility. Together with cash generated from
operations, the Company is fully funded for all of its planned
activities in 2020.
Non-cash impairment of historic balance sheet capex of non-core
assets
-- A review of historic capitalised expenditure at the Company's
non-core assets at North West Gemsa, South Ramadan and the southern
exploration area of South Disouq, which will likely be relinquished
during 2020, and, a comparison against remaining reserves, future
capex and opex budgets, remaining time to expiry on concessions and
future prospectivity, has resulted in the recognition of non-cash
impairments which could amount to approximately US$18 million
(unaudited). The final impairment charge will be reflected in the
Company's Consolidated Statement of Comprehensive Income for the
year ended 31 December 2019.
-- The above impairments have no impact on the Company's future
cash flows or growth potential.
Mark Reid, CEO of SDX, commented:
"2019 was a successful year for SDX, with all key metrics being
ahead of expectations, success with the drill bit and our key South
Disouq development project completing on time and on budget.
We have entered 2020 in a strong position with production at
record levels, good monthly cash generation, a strong balance sheet
and a busy work programme of drilling ahead of us, which is all
fully funded.
With eight wells planned for H1 2020, six of which are
exploration/appraisal in nature, we are moving into a very exciting
period of activity and I look forward to providing further updates
in due course."
2019 actual production
-- 2019 actual production at 4,020 boe/d is 12% higher than
2018, and by individual asset, has either exceeded or is at the
upper end of 2019 guidance. An analysis of 2019 production by asset
is as follows:
Gross production SDX entitlement SDX entitlement
production production
boe/d boe/d
Asset Actual - 12 Guidance - 12 Actual Actual
months ended months ended 31 12 months 12 months
31 December December 2019 ended 31 ended
2019(1) December 31 December
2019(1) 2018
--------------- ---------------------- ---------------- ----------------
Core assets
--------------- ---------------------- ---------------- ----------------
South Disouq - 6.9 MMscfe/d N/A 630 -
WI 55%
--------------- ---------------------- ---------------- ----------------
4,000 - 4,200
Meseda - WI 50% 4,180 bbl/d bbl/d 790 734
--------------- ---------------------- ---------------- ----------------
6.0 - 6.5 MMscf/d
2019 annual average
Morocco - WI 75% 6.4 MMscf/d rate 800 646
--------------- ---------------------- ---------------- ----------------
Non-core asset
--------------- ---------------------- ---------------- ----------------
NW Gemsa - WI 3,000 - 3,200
50% 3,600 boe/d boe/d 1,800 2,194
--------------- ---------------------- ---------------- ----------------
Total 4,020 3,574
---------------- ----------------
1 - 2019 actual production subject to final invoicing
o South Disouq: the field was brought on production as planned
in Q4 2019, however the performance of the CPF and wells has
exceeded expectations leading to an accelerated ramp up to plateau
of gross 50 MMcfe/d in mid-December.
o Meseda: strong gross production in the first nine months of
2019 from new wells and the well workover programme ensured that,
despite increasing water cut in the field in the latter part of the
year, annual production was at the upper end of guidance.
o Morocco: during the second half of 2019 all customers achieved
expected consumption rates, with average gross production in Q4'19
of 7.1 MMscf/d, resulting in annual gross production being at the
upper end of guidance.
o NW Gemsa: gross production was c.400 boe/d above guidance due
to stronger performance than forecast as a result of slower rate of
pressure decline and a slowdown in water cut increases from a
number of larger producing wells.
2020 production guidance
-- 2020 production guidance of 6,750 - 7,000 boe/d is 68-74%
higher than 2019 actual production. An analysis of our 2020
production guidance compared to 2019 actual production by asset is
as follows:
Gross production SDX entitlement SDX entitlement
production production
boe/d boe/d
Asset Guidance - 12 Actual - 12 months Guidance Actual
months ended ended 31 December 12 months 12 months
31 December 2019(1) ended 31 ended
2020 December 31 December
2020 2019(1)
------------------ -------------------- ---------------- ----------------
Core assets
------------------ -------------------- ---------------- ----------------
South Disouq - 4,300 -
WI 55% 47 - 49 MMscfe/d 6.9 MMscfe/d 4,460 630
------------------ -------------------- ---------------- ----------------
3,200 - 3,300
Meseda - WI 50% bbl/d 4,180 bbl/d 610 - 630 790
------------------ -------------------- ---------------- ----------------
Morocco - WI 75% 6.7- 6.9 MMscf/d 6.4 MMscf/d 840 - 860 800
------------------ -------------------- ---------------- ----------------
Non-core asset
------------------ -------------------- ---------------- ----------------
NW Gemsa - WI 2,000 - 2,100 1,000 -
50% boe/d 3,600 boe/d 1,050 1,800
------------------ -------------------- ---------------- ----------------
6,750 -
Total 7,000 4,020
---------------- ----------------
1 - 2019 actual production subject to final invoicing
o South Disouq: production guidance reflects a continuation of
the 50MMscfe/d current production rate adjusted for CPF expected
uptime/availability during the year.
o Meseda: although up to three wells are planned for 2020, the
lower production guidance reflects the assumption that the two
wells targeting meaningful incremental production may not be
drilled until Q3 2020 due to the expected time to complete
government and offset operator discussions on
approvals/permitting.
o Morocco: production guidance reflects an assumed increase in
consumption from existing Morocco gas customers during 2020.
o NW Gemsa: as the asset is late life, production guidance
reflects the impact of increased water cut, falling reservoir
pressure and an assumption that no new infill wells will be drilled
in 2020. The Company may exit this concession during the year if
sufficient cost savings cannot be achieved by the operator.
2019 actual capex
-- 2019 capex of c.US$40.7 million (unaudited) is US$4.5 million
higher than 2019 guidance of c.US$36.2 million. US$2.9 million of
this increase is explained below in the table of 2019 capex by
asset, with US$3.1 million as a result of six Moroccan wells being
drilled in Q4'19 rather than the planned four. The remaining US$1.6
million of the increase relates to unbudgeted capex in South
Ramadan due to an unbudgeted overspend on the final work commitment
on this concession. An analysis of 2019 capex by asset is as
follows:
Asset Actual - 12 Guidance -
months ended 12 months
31 December ended 31 December
2019 2019
Core assets
---------------- -------------------
South Disouq - WI US$20.2 million US$19.5 million
55%
---------------- -------------------
Meseda - WI 50% US$1.5 million US$2.7 million
---------------- -------------------
Morocco - WI 75% US$16.1 million US$12.0 million
---------------- -------------------
Non-core assets
---------------- -------------------
NW Gemsa - WI 50% US$1.3 million US$2.0 million
---------------- -------------------
South Ramadan - US$1.6 million Nil
WI 12.75%
---------------- -------------------
Total US$40.7 million US$36.2 million
---------------- -------------------
o South Disouq: capex at US$20.2 million was US$0.7 million
above guidance as it was decided to add a second Ibn Yunus flowline
for the planned Ibn Yunus-2 development well (scheduled for
drilling in 2021) during the laying of the Ibn Yunus-1 line as
laying these lines concurrently avoids paying a second tranche of
land use rental and farmers' compensation when Ibn Yunus-2 is
brought on stream.
o Meseda: capex at US$1.5 million was US$1.2 million below
guidance as only two of the planned three development wells were
drilled in 2019 as a result of delays in obtaining government and
offset operator approval for the third well. Furthermore, neither
of the planned two water injection wells were drilled and no
electrical submersible pump replacements were required as
previously anticipated.
o Morocco: capex at US$16.1 million was US$4.1 million above
guidance mainly as a result of six, rather than four, wells being
drilled in Q4'19 due to the campaign starting early and rig move
times between wells being shorter than expected. This resulted in
capex being US$3.1 million higher than guidance. Additionally, the
Company acquired two compressors in Q4'19 to maximise recovery from
existing well sites. The cost of these compressors was c.US$1
million, which has already been paid back from additional gas
volumes produced.
o NW Gemsa: capex at US$1.3 million was US$0.7 million below
guidance as only five workovers were required against 10 planned
due to overall field performance being better than anticipated.
2020 capex guidance
-- 2020 capex guidance of c.US$25.5 million predominantly
relates to the completion of the Morocco 12 well drilling campaign,
the drilling of the two exploration wells and well workovers
planned for South Disouq, and a deposit on the booster compressor
planned for South Disouq in 2021, up to three appraisal/development
wells in Meseda and up to 10 workovers in North West Gemsa.
Asset Guidance - 12
months ended
31 December
2020
Core assets
----------------
South Disouq US$6.5 million
- WI 55%
----------------
Meseda - WI 50% US$2.0 million
----------------
Morocco - WI US$15.0 million
75%
----------------
Non-core asset
----------------
NW Gemsa - WI US$2.0 million
50%
----------------
Total US$25.5 million
----------------
Non-cash impairment of historic balance sheet capex of non-core
assets
-- Having conducted a preliminary impairment indicator review,
the Company advises that it is likely that up to US$18 million
(unaudited) of impairments will be recognised across certain
non-core assets in the upcoming financial statements for the year
to 31 December 2019. This impairment, which is analysed below, has
no impact on the Company's future cash flows or growth potential
and will be reflected in the Consolidated Statement of
Comprehensive for the year ended 31 December 2019:
o NW Gemsa: lower oil price assumptions, increased water
breakthrough reducing oil production in late 2019 and continuing
high opex may lead to the concession becoming uncommercial and a
subsequent relinquishment may occur. As such an impairment of
between US$7-9 million is likely to be recognised.
o South Ramadan: an updated assessment of discovered volumes and
likely future capex/opex requirements indicates that the Company's
historic capitalised expenditure will not be fully recovered. As
such an impairment of up to US$5 million is likely to be
recognised.
o South Disouq (southern exploration area of the concession): as
there is insufficient time before the concession expires to drill
the prospects in the southern exploration area of the concession
identified by the 2018/19 3D seismic survey, an impairment of up to
US$4 million in relation to this 3D seismic is likely to be
recognised. The exploration wells to be drilled in Q1 and Q2 2020
are in the northern part of the concession close to the Company's
core producing area which is held under a 25-year development
lease.
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 and a 50% non-operated interest in each
of the North West Gemsa and Meseda concessions, which are 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. The producing assets in Morocco are
characterised by exceptionally low operating costs, making them
particularly resilient 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
Nicholas Rhodes
Ashton Clanfield
Tel: +44 (0) 20 7710 7600
Cantor Fitzgerald Europe (Joint Broker)
David Porter
Tel: +44 207 7894 7000
Camarco (PR)
Billy Clegg/Owen Roberts/Violet Wilson
Tel: +44 203 757 4980
Glossary
"bbl" stock tank barrel
"bbl/d" barrels of oil per day
------------------------------
"bcf" billion cubic feet
------------------------------
"bcfe" billion cubic feet equivalent
------------------------------
"boe/d" barrels of oil equivalent per
day
------------------------------
"Mcf" thousands of cubic feet
------------------------------
"MMcf/d" million cubic feet per day
------------------------------
"MMcfe/d" million cubic feet 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 Company's 2020 production and capex guidance, the sufficiency
of reserves to fulfill existing customer contracts, future drilling
developments and results, and extending the tenor and 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
SDX's Management's Discussion & Analysis for the three and nine
months ended 30 September 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, including its
exploration activities.
The forward-looking information contained in this press release
is as of the date hereof and SDX does not undertake any obligation
to update publicly or to revise any of the included
forward--looking information, except as required by applicable law.
The forward--looking information contained herein is expressly
qualified by this cautionary statement.
Oil and Gas Advisory
Certain disclosures in this news release constitute "anticipated
results" for the purposes of National Instrument 51-101 - Standards
for Oil and Gas Activities 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 1bbl: 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
The prospective resource estimates disclosed or referenced
herein have been prepared by an independent qualified reserves
evaluator, ERC Equipoise Limited, in accordance with the Canadian
Oil and Gas Evaluation Handbook. The prospective resources
disclosed herein have an effective date of 1 January 2019.
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%. Anticipated results are subject to certain
risks and uncertainties, including 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.
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.
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
UPDSEAFWFESSELF
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