SDX announces 2019 results
Tuesday, April 7, 2020
Press Release
SDX Energy has announced its audited financial and operating results for the year ended 31 December 2019. All monetary values are expressed in United States dollars net to the Company unless otherwise stated.
2019 Operations highlights
- 2019 entitlement production of 4,062 boe/d was 14% higher than 2018, and by individual asset, production either exceeded or was at the upper end of 2019 guidance. The 24% year on year production increase in Morocco supported our customers’ growth using natural gas, a less carbon-intensive fuel source.
- South Disouq field brought on production as planned in Q4 2019. The performance of the Central Processing Facility (“CPF”) and wells exceeded expectations and resulted in an accelerated ramp up to plateau of gross 50 MMscfe/d in mid-December, which was three months ahead of expectations. This performance has been sustained to date in 2020.
- Continuing the exploration drilling campaign in South Disouq, the SD-12X well targeting gross 33 bcfe as estimated by management was spud on 18 March 2020. The SD-6X well encountered sub-economic quantities of gas, however this has no anticipated read across to SD-12X.
- The Moroccan drilling campaign, which commenced in Q4 2019, has resulted in seven discoveries from nine wells drilled to date, with the tenth well, LMS-2, completed and awaiting crew mobilisation for testing. Significantly, the discoveries at OYF-2 and BMK-1 have confirmed that 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. Five commercial discoveries close to existing infrastructure have increased gross 2P gas reserves to 6.0 bcf as at 31 December 2019, up from 5.1 bcf as at 31 December 2019. All of the objectives of the drilling campaign were achieved with 10 wells allowing the Company to preserve capital and defer the final two wells to a later campaign.
- As at 31 December 2019, the Company’s working interest share of audited(1) 2P reserves was 12.0 mmboe and audited 2C contingent resources was 2.6 mmboe(2). Approximately 2.3 mmboe of the 2.6 mmboe of contingent resources relates to the Company’s Meseda and Rabul producing assets in its West Gharib concession in Egypt. These contingent resources will be converted to 2P reserves upon approval of the development plan for the wells required to produce them.(2) Using a conversion ratio of 6.0 Mcf:1 boe .
- Q1 2020 Operational update
- (1) The Company’s 2P reserves and 2C resources estimates have been audited in accordance with the COGE Handbook & PRMS by Gaffney, Cline & Associates, an independent qualified reserves evaluator and auditor.
- Q1’20 daily average production estimated to be at or above upper end of 2020 guidance for all assets.
- During the second half of March 2020, have temporarily impacted our customers’ operations. If the restrictions continue at current COVID-19 containment restrictions in Morocco levels for the remainder of Q2’20, customer consumption in Q2’20 could be 50% lower than in Q1’20. Moroccan production/consumption guidance for 2020 will be reviewed when the Company has better visibility on the likely duration of these containment restrictions. The Company’s Moroccan business however is extremely resilient and can breakeven with customer consumption levels at 20% of Q1’20 levels. Consumption is expected to revert to Q1’20 levels once the COVID-19 restrictions are lifted. Egyptian operations remain unaffected by COVID-19 at present.
- 2020 Production Guidance
- 2020 production guidance of 6,750 – 7,000 boe/d is 66-72% higher than 2019 actual production.
- 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 remain closed down for three months, then FY 2020 guidance of 6.7-6.9 MMscf/d is likely to be revised to 5.7-6.2 MMscf/d and if the close down extends to six months, then the guidance would be revised to 5.0-5.5 MMscf/d.
- “To summarise, SDX is in an extremely robust position to face the challenges ahead, and with our fixed priced gas weighting and our healthy liquidity position, we remain committed to realising value for our shareholders by capitalising on a strong year and growing the Company further in 2020.”
- “Looking ahead, we see significant challenges in the industry, not least in the downward revision in both oil prices and equity valuations and the uncertainty caused by COVID-19. However, we feel it important to note that, after the restart of operations at our three Moroccan customers that are temporarily closed due to COVID-19 issues, we expect that with a Brent planning price of US$35/bbl approximately 90% of 2020 and over 95% of 2021 forecast cash flows will come from our fixed price gas businesses, insulating us from much of the impact of falling oil price. We also remain fully funded for all of our 2020 activities from existing cashflows, a cash balance of US$11.1 million at the year end and a US$7.5 million undrawn EBRD credit facility.
- Mark Reid, CEO of SDX, commented: “2019 was a year of significant operational progress for SDX. Production increased by 14% in the year, and on an individual asset basis it either exceeded or was at the upper end of our 2019 guidance. In the period, we announced first gas on time and on budget from South Disouq in Egypt and a subsequent accelerated ramp up to full production three months ahead of internal expectations. This was a significant milestone for the Group and as well as increasing production in a meaningful way, it also showed the competencies of our Company in being able to bring a project of this scale online in such an efficient manner. Elsewhere in Egypt, we had a successful workover campaign at North West Gemsa which helped add to our strong production performance in the period. In Morocco the drilling campaign which commenced in Q4 2019, has resulted in seven discoveries out of nine wells drilled to date, a tenth well is to be tested, with two additional compressors and well workovers in the second half of the year adding significant gas deliverability to the existing well stock. I am also very pleased that our 24% year on year production increase in Morocco continues to support our customers’ growth using lower carbon natural gas.
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