TIDMSDX
RNS Number : 4008N
SDX Energy PLC
20 May 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 May 2020
SDX ENERGY PLC ("SDX" or the "Company")
ANNOUNCES Q1 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 three months ended 31 March 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 9.30am UK time, details of which can be
found in the release below.
Mark Reid, CEO of SDX, commented:
"The first quarter of 2020 proved to be a positive period for
SDX against the backdrop of a challenging global economic
environment. Production has been above expectations and I am
pleased that our resilient business continued to generate cash from
our oil and gas production as well as discovering new resource
through the drill bit in both Morocco and Egypt. Although we are
currently living in a dynamic and fast-changing environment, it
gives me great reassurance that approximately 90% of the Company's
2020 cash flows are expected to be generated from our fixed-price
gas business. Disruption to our business as a result of COVID-19
has so far been minimal, and we are pleased that our three Moroccan
customers that were temporarily closed are beginning to take gas
again. Our ongoing cash generation and cash position remains strong
and we continue to have access to US$7.5 million of additional
liquidity through our EBRD credit facility. That said, capital
discipline remains our key priority as we continue to navigate the
year with necessary caution to our surrounding environment but also
with confidence in the ability of our business to produce
significant returns in 2020 and to continue to grow
thereafter."
Q1 2020 Operations highlights
-- Q1 2020 entitlement production of 8,061 boe/d is 117% higher
than Q1 2019 and is at, or exceeding, 2020 guidance. Strong
production levels were driven by South Disouq, which performed
ahead of expectations - gross production of 51.4 MMscf/d of dry gas
and 511 bbl/d of condensate equating to 4,994 boe/d net to SDX.
-- South Disouq two-well drilling campaign commenced during the
quarter. The first well, SD-6X, encountered sub-economic quantities
of gas and was plugged and abandoned. The second well, SD-12X, spud
on 18 March and post-period end was announced as a commercial
discovery in the Kafr el Sheikh formation, with management
estimating 24 bcf recoverable resources. Plans 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.
-- Following the success of SD-12X, management is looking to
high grade other adjacent, and now de-risked, 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 P50 prospective resources. All objectives of the
drilling campaign were achieved with 10 wells with the final two
wells deferred to preserve capital.
-- Following the drilling campaigns at South Disouq and Morocco,
SDX has incurred the majority of its planned capex for 2020.
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. In early May these same customers re-started
production, albeit not at full capacity, and as at 19 May 2020 had
returned to approximately 40% of their pre-closure consumption
rates. The Company will continue to monitor this situation and
provide an update on Moroccan production guidance after the three
customers have returned to more steady state and predictable
consumption levels. The Company's Moroccan business remains
extremely resilient and can breakeven with customer consumption
levels at 20% of Q1 2020 levels. Egyptian operations remain
unaffected by COVID-19 at present. The Company continues to follow
applicable government guidance in each of its territories.
2020 Guidance
-- 2020 production guidance of 6,750 - 7,000 boe/d is 66-72%
higher than 2019 actual production.
-- 2020 capex guidance has been revised up from US$24.7 million
as per the Company's annual results operations update provided on 7
April, to c.US$28.2 million. The revision reflects the 100% cost of
tying in the successful SD-12X well in South Disouq.
Q1 2020 Financial Highlights
Three months ended
31 March (unaudited)
US$ million except per unit 2020 2019
amounts
----------- -----------
Net revenues 16.0 12.7
----------- -----------
Netback(1) 12.1 9.3
----------- -----------
Net realised average oil price/service
fees - US$/barrel 43.03 54.58
----------- -----------
Net realised average Morocco
gas price - US$/mcf 10.33 10.26
----------- -----------
Net realised South Disouq gas 2.85 -
price - US$/mcf
----------- -----------
Netback - US$/boe 16.47 27.84
----------- -----------
EBITDAX(1) (2) 11.1 7.8
----------- -----------
Exploration & evaluation expense(3) (4.8) (0.2)
----------- -----------
Depletion, depreciation and
amortisation (6.7) (5.9)
----------- -----------
Total comprehensive (loss)/income (3.2) 0.1
----------- -----------
Capital expenditure 15.5 13.0
----------- -----------
Net cash generated from operating
activities 6.3 7.0
----------- -----------
Cash and cash equivalents 8.8 11.4
----------- -----------
(1) Refer to the "Non-IFRS Measures" section of this release
below for details of Netback and EBITDAX.
(2) EBITDAX for Q1 2020 and 2019 includes US$2.1 million and
US$1.0 million respectively of non-cash revenue relating to the
grossing up of Egyptian corporate tax on the North West Gemsa (both
periods) and South Disouq (2020 only) PSCs 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
items.
-- Realised prices: Q1 2020 realised Moroccan gas prices of
US$10.33/mcf (Q1 2019: US$10.26/mcf) and oil prices of US$43.03/bbl
(Q1 2019: US$54.58/bbl). Noting the continued significant
volatility in crude oil prices, and assuming a US$35 Brent planning
price, the Company reemphasises that, due to its gas businesses
having fixed priced contracts of US$2.65/MMbtu (US$2.85/mcf) in
Egypt and approximately US$10-US$12/mcf in Morocco and assuming no
further prolonged business interruptions as a result of COVID-19,
approximately 90% of the Company's 2020 cash flows will be
generated from these gas business, increasing to over 95% in
2021.
-- Netback: Q1 2020 netback of US$12.1 million, 30% higher than
Q1 2019, was driven by a full quarter of production above
expectations from South Disouq and high consumption levels in
Morocco until COVID-19 shutdowns occurred in mid-March. These were
partly offset by lower production in West Gharib and North West
Gemsa due to increased water cut and lower oil price realisations.
Operating expenses were higher due to South Disouq starting up in
November 2019.
-- EBITDAX: Q1 2020 EBITDAX of US$11.1 million was 42% higher
than Q1 2019 of US$7.8 million due to higher netback, lower
recurring G&A and no transaction costs in 2020.
-- DD&A: Q1 2020 charge higher at US$6.7 million compared to
US$5.9 million in Q1 2019 due to South Disouq start up in Q4 2019,
partly offset by no DD&A charge for NW Gemsa in 2020 as the
asset is fully impaired. Morocco also had a reduced charge
following 2P reserves additions from the recent drilling campaign
in Q4 2019.
-- 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): Q1 2020 operating cash
flow (before capex) of US$6.3 million, lower than Q1 2019 of US$7.0
million primarily due to Q1 2019 reflecting US$2.4 million of cash
inflows from the reduction of backdated Egyptian receivables
compared to cash outflows from receivables of US$1.6 million in Q1
2020 as the South Disouq invoices were processed by EGAS who
typically take longer to pay compared to EGPC and GPC being the
State entities that settle oil receivables. The Company has no
long-dated Egyptian receivables as at 31 March 2020.
-- Capex: Q1 2020 capex of US$15.5 million, reflecting:
o US$10.7 million (including $0.5 million of decommissioning
provisions) for the Moroccan drilling campaign;
o US$3.6 million for the drilling of the SD-6X (SDX: 55%
interest) and SD-12X (SDX: 100% interest) wells in South
Disouq;
o US$0.7 million for additional work and insurance spares at the
South Disouq Central Processing Facility ("CPF"); and
o US$0.5 million for drilling/workovers in West Gharib.
-- Liquidity: Closing cash as at 31 March 2020 was US$8.8
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
rather than reducing to US$5.0 million. 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.
Operations Update
Q1 2020 Production
-- Q1 2020 actual entitlement production of 8,061 boe/d is 117%
higher than 2019, and by individual asset, has either exceeded or
is at the upper end of 2020 guidance. An analysis of production by
asset is as follows:
Gross production SDX entitlement SDX entitlement
production production
boe/d boe/d
Asset Actual - 3 Guidance - 12 Actual Actual
months ended months ended 31 3 months 3 months
31 March 2020 December 2020 ended 31 ended 31
March 2020 March 2019
---------------- ------------------ ---------------- ----------------
Core assets
---------------- ------------------ ---------------- ----------------
South Disouq - 54.5 MMscfe/d 47 - 49 MMscfe/d 4,994 -
WI 55%
---------------- ------------------ ---------------- ----------------
West Gharib - 3,200 - 3,300
WI 50% 3,494 bbl/d bbl/d 666 826
---------------- ------------------ ---------------- ----------------
Morocco - WI 75% 6.9 MMscf/d 6.7- 6.9 MMscf/d 863 761
---------------- ------------------ ---------------- ----------------
Non-core asset
---------------- ------------------ ---------------- ----------------
NW Gemsa - WI 2,000 - 2,100
50% 3,076 boe/d boe/d 1,538 2,128
---------------- ------------------ ---------------- ----------------
Total 8,061 3,715
---------------- ----------------
o South Disouq (W.I. 55%) : The South Disouq asset has performed
above expectations during Q1 2020, with all four wells flowing
ahead of expected rates and the CPF achieving higher than planned
levels of uptime. Scheduled CPF maintenance is planned for Q2
2020.
o West Gharib (W.I. 50%): A new production well, Rabul-3, was
successfully drilled and completed in Q1 2020, and was tied into
the field production system in April. The existing well stock
experienced increasing water cut during the quarter, meaning that
overall production was lower than the same period in 2019, albeit
above guidance for 2020.
o Morocco (W.I. 75%): Production was robust throughout much of
the period, with all customers taking at least their contracted
consumption levels. However, during the second half of March the
Company received notice from three of its customers, collectively
accounting for 50% of normal daily consumption, that due to
COVID-19 restrictions imposed by the Government of Morocco they
would be closing their plants until further notice. These
restrictions have remained in place post-period end albeit during
the week commencing 4 May the three customers re-started their
operations and began to take gas again. The Company will continue
to monitor this situation and provide an update on Moroccan
production guidance after the three customers have returned to more
steady and predictable consumption levels.
o NW Gemsa (W.I. 50%): The field has exceeded expectations,
primarily due to a slower rate of pressure depletion and water cut
increase.
o South Ramadan (W.I. 12.75%): Post period end, South Ramadan,
situated offshore in the Gulf of Suez, commenced production at
approximately gross 350 bbl/d. Post completion of an acid
stimulation operation in June, the operator expects production to
increase to approximately 1,200 bbl/d.
2020 Production Guidance
o South Disouq : Gross production guidance is maintained at 47-
49 MMscfe/d reflecting CPF expected uptime/availability during the
year. Q1 2020 reflects a period of better than expected uptime from
the CPF and strong well performance.
o West Gharib: Although up to two more wells are planned for
2020, in the current price environment the Company and its partner
may elect to defer this activity in order to preserve capital. Q1
2020 reflects better than expected field performance as a result of
a number of successful operational improvement initiatives jointly
carried out by SDX and its partner Dublin Petroleum. As such, and
notwithstanding the potential deferral of the two planned wells
into 2021, the Company is maintaining production guidance at
3,200-3,300 bbl/d (gross) .
o Morocco: Production guidance is maintained at 6.7-6.9 MMscf/d
(gross) at present. The asset's production in March and April was
impacted by the shutdown of three customers' operations due to
COVID-19 restrictions. At the date of writing, all three customers
have re-opened, albeit at consumption rates below full capacity. An
update on Moroccan production guidance will be provided after the
three customers have returned to more steady state and predictable
consumption levels. Whilst the level of potential revision to FY
2020 Moroccan guidance is as yet unknown, as an indication, it
should be noted that if the three customers were closed down in
full for three months over the year, then FY 2020 guidance of
6.7-6.9 MMscf/d would be revised to 5.7-6.2 MMscf/d and if their
close down was to extend to six months, then the guidance would be
revised to 5.0-5.5 MMscf/d.
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. Whilst Q1 2020 production reflects a slower than expected
decline in production, this is not expected to be sustained. As
such, the Company is likely to exit this concession during the year
if sufficient cost savings cannot be achieved by the operator.
o To date, COVID-19 has not impacted production operations in
Egypt.
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 close-by 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 well
results are currently being analysed.
-- 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, which
began with a step-rate test of one hour achieving a maximum rate of
25 MMscf/d on a 54/64" choke. 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. From an initial review of the well-test
data, it is anticipated that when connected, 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 and will be subject to a longer rig-less
test in the coming weeks which will provide more data to help
determine the recoverable volume in the discovery. It is expected
that the results of the rig-less test will be available in late
Q2/early Q3.
-- 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, is
estimated at US$3.7 million. Under Clause 8.5 of the Joint
Operating Agreement 'Premium to Participate in Exclusive
Operations', if the Company's partner elects to participate in the
well now that a discovery has been made, it is required to pay its
full 45% share of the well cost, plus a premium of a further 300%
of this amount.
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 central
processing facilities at West Gharib and clean-up, the well is
expected to produce at an average stabilised rate of approximately
300 bbl/d.
2020 Drilling and Operations Guidance
-- 2020 capex guidance has been revised up from US$24.7 million
as per the Company's annual results operations update provided on 7
April, to c.US$28.2 million. The revision reflects the 100% cost of
tying in the successful SD-12X well in South Disouq. 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$28.2 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 31 March 2020 represents the full costs of the
non-commercial SD-6X well, partial costs of the SD-12X well which
was drilling over the period end and some equipment spares for the
CPF;
o US$2.0 million for up to three appraisal/development wells in
West Gharib;
o US$13.5 million for the Morocco drilling campaign, which
completed in March, and new well connections and customer
infrastructure which are expected to be incurred from Q2'20
onwards; and
o US$2.0 million for up to 10 workovers in North West Gemsa. As
the Company is expecting to exit the concession during 2020, it
does not expect to incur the full amount of this capex prior to
exit.
Asset Guidance - 12 Actual - 3 months
months ended ended 31 March
31 December 2020
2020
Core assets
---------------- ------------------
South Disouq US$10.7 million US$4.3 million
- WI 55%
---------------- ------------------
West Gharib - US$2.0 million US$0.5 million
WI 50%
---------------- ------------------
Morocco - WI US$13.5 million US$10.7 million
75%
---------------- ------------------
Non-core asset
---------------- ------------------
NW Gemsa - WI US$2.0 million US$nil million
50%
---------------- ------------------
Total US$28.2 million US$15.5 million
---------------- ------------------
Q1 2020 Financial Update
-- The main components of SDX's comprehensive loss of US$3.2
million for the three months ended 31 March 2020 are:
o US$12.1 million netback;
o US$4.8 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;
and
-- US$2.2 million is the write off of the sub-commercial SAH-5
well in Morocco, including associated 3D seismic costs;
o US$6.7 million of Depletion, Depreciation & Amortisation
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 drilling;
o US$1.0 million of ongoing General & Administrative
expense; and
o US$2.3 million of Egyptian corporation tax, of which South
Disouq accounted for US$1.4 million.
-- Netback for the three months to 31 March 2020 was US$12.1
million, 30% higher than the netback of US$9.3 million for the
three months to 31 March 2019, driven by:
o Net revenue increase of US$3.3 million is due to:
o US$4.8 million of South Disouq revenue, following production
start up in Q4 2019; and
o US$0.7 million higher revenue in Morocco due to increased
production (Q1 2020: 863 boe/d, Q1 2019: 761 boe/d);
o partly offset by lower realised prices at NW Gemsa (Q1 2020:
US$45.09/bbl, Q1 2019: US$58.22) and West Gharib (Q1 2020:
US$38.88/bbl, Q1 2019: US$47.58/bbl); and
o lower production at NW Gemsa (Q1 2020: 1,538 boe/d, Q1 2019:
2,128 boe/d) and West Gharib (Q1 2020: 666 boe/d, Q1 2019: 826
boe/d).
o Operating costs increasing by US$0.5 million from prior period
due to the commencement of production at South Disouq, partly
offset by lower costs at each of the other assets.
-- EBITDAX for the three months to 31 March 2020 was US$11.1
million, US$3.3 million higher than EBITDAX of US$7.8 million for
the three months to 31 March 2019, due to higher netback, lower
G&A due to allocations to Q1 2020 drilling activity and the
absence in 2020 of transaction costs associated with the Company's
redomicile to the UK in 2019.
Operating cash flow (before capex)
-- Operating cash flow (before capex): Q1 2020 operating cash
flow (before capex) of US$6.3 million, is lower than Q1 2019 of
US$7.0 million primarily due to Q1 2019 reflecting US$2.4 million
of cash inflows from the reduction of backdated Egyptian
receivables compared to cash outflows from receivables of US$1.6
million in Q1 2020 as the South Disouq invoices were processed by
EGAS. who typically take longer to pay compared to EGPC and GPC
being the State entities that settle oil related receivables The
Company has no long-dated Egyptian receivables as at 31 March
2020.
CAPEX
-- US$15.5 million of capital expenditure has been invested into
the business during the three months ended 31 March 2020:
o US$10.7 million (including $0.5 million of decommissioning
provisions) for the Moroccan drilling campaign;
o US$3.6 million for the drilling of the SD-6X (SDX: 55%
interest) and SD-12X (SDX: 100% interest) wells in South
Disouq;
o US$0.7 million for additional work and insurance spares at the
South Disouq CPF; and
o US$0.5 million for drilling and workovers in West Gharib.
Liquidity update
-- Closing cash as at 31 March 2020 was US$8.8 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 rather
than reducing to US$5.0 million.
-- 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.
Impact of COVID-19 on ongoing production operations
-- As highlighted above, the Company has a strong liquidity
position and the majority of its cash flows in 2020 and 2021 are
expected to come from its fixed price gas customers in Morocco and
Egypt.
o In Egypt, SDX sells all of its gas directly to the Egyptian
state to be used primarily for electricity generation. The Company
does not expect that COVID-19 will cause any material disruption to
this offtake arrangement.
o In Morocco, SDX's gas is sold to eight industrial users, for
whom natural gas is integral to their energy supply and operations.
These customers operate across a number of sectors including
ceramics, packaging, food, and automotive.
o On 23 March 2020, Super Cerame, the Company's largest customer
in Morocco, together with Peugeot SA and Plastic Omnium advised the
Company that they will be temporarily closing down operations due
to COVID-19. These three customers account for approximately 50% of
total Moroccan revenues, with Super Cerame accounting for
approximately 46% of total Moroccan revenues. These customers
remained closed until the week commencing 4 May 2020, at which
point each re-started their plants, albeit at consumption levels
below full capacity, and as at 19 May 2020 had returned to
approximately 40% of their pre-closure consumption rates. It is
expected that over time consumption will ramp back up to
pre-COVID-19 levels, however there is no certainty as to when this
will happen, or that there will not be additional forced
closures.
o The Company's Moroccan business is extremely resilient and can
breakeven with customer consumption levels at 20% of Q1 2020
levels.
o At this point, production operations in Egypt have not been
impacted however given the seriousness of COVID-19, this situation
may be subject to change in the future.
o Following completion of the drilling campaigns in South Disouq
and Morocco, the majority of planned CAPEX for 2020 has been
incurred, and discretion will be exercised when considering future
capital allocation.
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
-- The Annual General Meeting ("AGM") of the Company will take
place on 22 May 2020 at 10:00am UK time. The Company reminds
shareholders that the Board of Directors fully supports the current
UK Government requirements for people to avoid both gatherings of
more than two people who do not live together and all non-essential
travel and social contact. As such, shareholders should not attempt
to attend the AGM in person.
KEY FINANCIAL & OPERATING HIGHLIGHTS
Three months
ended 31 March
31
----------------------------------- --- -----------------------------
2020 2019
$000s except per unit amounts (unaudited) (unaudited)
----------------------------------- ---- ---------------
FINANCIAL
----------------------------------- ---- ---------------
Gross revenues 21,420 16,690
Royalties (5,464) (4,009)
Net Revenues 15,956 12,681
Operating costs (3,875) (3,374)
Netback (1) 12,081 9,307
EBITDAX (1) 11,133 7,808
Total comprehensive (loss)/income (3,153) 132
Net income/(loss) per share
- basic (0.015) 0.001
Cash, end of period 8,807 11,354
Capital expenditures 15,535 13,040
Total assets 135,648 137,630
Shareholders' equity 95,123 116,491
Common shares outstanding
(000's) 204,723 204,723
OPERATIONAL
-------------
NW Gemsa oil sales (bbl/d) 1,335 1,586
West Gharib production service
fee (bbl/d) 666 826
South Disouq gas sales (boe/d) 4,713 -
Morocco gas sales (boe/d) 863 761
Other products sales (boe/d) 484 542
----------------------------------------- ------------- ---------------
Total sales volumes (boe/d) 8,061 3,715
----------------------------------------- ------------- ---------------
Realised oil price (US$/bbl) 45.09 58.22
Realised service fee (US$/bbl) 38.88 47.58
----------------------------------------- ------------- ---------------
Realised oil sales price
and service fees ($/bbl) 43.03 54.58
----------------------------------------- ------------- ---------------
Realised Morocco gas price
(US$/mcf) 10.33 10.26
Royalties ($/boe) 7.45 11.99
Operating costs ($/boe) 5.28 10.09
Netback ($/boe) (1) 16.47 27.84
(1) Refer to the "Non-IFRS Measures" section of this release
below for details of Netback and EBITDAX.
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
four producing assets: a 55% operated interest in the South Disouq
gas field in the Nile Delta, a 50% non-operated interest in each of
the North West Gemsa and West Gharib concessions, which are 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 the Sebou concession, 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
Cantor Fitzgerald Europe (Joint Broker)
David Porter
Tel: +44 (0) 207 7894 7000
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 May 2020
Time: 9:30am GMT
Call details:
United Kingdom Toll: +44 3333000804
PIN: 44783267#
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
------------------------------
"MMbtu" millions of British thermal
units
------------------------------
"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 success of the acid
stimulation operations in South Ramadan, 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 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
QRFSFLFMUESSEDI
(END) Dow Jones Newswires
May 20, 2020 02:00 ET (06:00 GMT)
Grafico Azioni Sdx Energy (LSE:SDX)
Storico
Da Mar 2024 a Apr 2024
Grafico Azioni Sdx Energy (LSE:SDX)
Storico
Da Apr 2023 a Apr 2024
