SDX Announces Financial and Operating Results, Exceeds Production Expectations
Tuesday, August 24, 2021
SDX Energy Plc announced its unaudited financial and operating results for the three and six months ended June 30, 2021, reporting that its H1 production was 3% higher than the midpoint guidance of 5,770 boepd.
Mark Reid, CEO of SDX, commented: “I am very pleased to report first half 2021 results that show strong growth in revenue, netback, EBITDAX and operating cash flows versus the same period in 2020, as well as ending the period with a strong liquidity position. The producing assets in Egypt and Morocco are performing well and we remain above our mid-point guidance for the year. Our drilling activities have yielded three successful wells in Morocco, all of which are now onstream and contributing to cash flow, and one at South Disouq, which is due to start up shortly. As previously announced, whilst the result of the Hanut-1X well is disappointing, I remain positive about the remaining prospectivity in the area which has not been materially impacted.”
Three and six months to 30 June 2021 Operations Highlights
- H1 2021 entitlement production of 5,931 boe/d was 3% higher than 2021 mid-point market guidance of 5,770 boe/d and 4% lower than H1 2020 mainly due to natural decline, well workovers and expected sand and water production in two of the five wells at South Disouq.
- Capex guidance for Morocco for the 12 months ended 31 December 2021 has been increased by US$1.5 million as wells planned for the second phase of 2021 drilling are deeper than those included in the original guidance. Capex of US$15.8 million was within guidance for South Disouq and West Gharib. This results in group 2021 capex guidance being revised to US$26.5 – 28.0 million (previous guidance US$25.0 – 26.5 million).
- The Company’s operated assets recorded a carbon intensity of 2.7kg CO2e/boe in H1 2021 which is one of the lowest rates in the industry. Scope 1 greenhouse gas emissions at operated assets were 4,405 tons of CO2e. Scope 3 greenhouse gas emissions in Morocco were 75,500 tons of CO2e, which is approximately 38,500 tons of CO2e less than using alternative heavy fuel oil.
- In South Disouq, the IY-2X step-out development well, the first of a two-well campaign, was spud in late June 2021. The well was drilled to a measured depth of 8,025 feet, encountering 40.5 feet net-pay of high-quality gas-bearing sands, with an average porosity of 23.4%, near the base of the Kafr El Sheikh (“KES”) formation. The top of the KES sand was encountered at a measured depth of 6,768 feet. Following well testing, the well is expected to be brought on production during the last week in August with a view to maximizing recovery from the Ibn Yunus Field and helping to maintain current gross production levels of c.45MMscfe/d at the South Disouq Central Processing Facility (the “CPF”).
- Post-period end, the second well, the Hanut-1X (“HA-1X”) exploration well, spudded on 4 August and reached the target depth of 6,000ft on 17 August. The primary target for HA-1X was the Basal Kafr El Sheikh sand at approximately 5,200ft. The well however found that the Basal Kafr El Sheikh sand had been eroded at this location. Whilst drilling to target depth, good quality sands were found at the Qawasim level, however they were not charged with gas. SDX considers the result of the HA-1X well to have limited impact on the remaining c.90-100bcf of prospectivity in the SDX acreage at South Disouq.
- Following the IY-2X and HA-1X well results, during H2 2021 the Company will evaluate the current and future prospectivity of the South Disouq concession to assess whether there is evidence that the carrying value of the asset should be impaired.
- In West Gharib, following the ten-year concession extension granted earlier in 2021, preparations continued for a campaign of three to four development wells, the first of which is expected to spud in early Q4.
- The first phase of the Morocco drilling campaign, which consisted of three appraisal/development wells in SDX’s operated Gharb Basin acreage in Morocco (SDX: 75% working interest), was successfully completed in June 2021.
- The OYF-3, KSR-17 and KSR-18 wells were all commercial successes, with OYF-3 and KSR-17 already connected as at 30 June 2021 and producing into the Company’s infrastructure. KSR-18 has been tested and was connected at the end of July 2021. Management estimates that 1.5-1.6bcf of gross resources have been added by these wells, which is in line with pre-drill P50 estimates. Preparations are underway for the drilling of up to two additional wells in Morocco later in the year.
- As previously announced, during the first half of the year, the Company received the COVID-19 delayed laboratory analysis of the cuttings and sidewall cores from the LMS-2 well. This information confirmed that LMS-2 had successfully encountered the targeted thermogenic gas source that exists in the Top Nappe horizon but that the reservoir in the Lalla Mimouna Nord concession has low permeability and the well is unlikely to flow conventionally. As such, the Company will not risk US$0.5 million testing this well, nor will it commit to further investment in the Lalla Mimouna Nord concession post the end of the concession date in July 2021 as a result of the limited likelihood of it being commercially developed. Accordingly, the Company has recognized a US$10.3 million non-cash impairment charge in Q2 ahead of relinquishment of the concession, of which US$2.8 million relates to LMS-2.
For the full announcement, please click here.
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