SDX Energy Plc (AIM: SDX), the North Africa-focused oil and gas company, announces its financial and operating results for the three and six months ended 30 June 2019. All monetary values are expressed in United States dollars net to the Company unless otherwise stated.
· H1 2019 production of 3,539 boe/d, net to SDX, an increase of 9% from H1 2018 due to successful drilling in Meseda and increased gas sales in Morocco. Q2 2019 production of 3,366 boe/d (net) was 9% lower than Q1 2019, primarily the result of an increased water cut in North West Gemsa.
· Construction of the South Disouq central processing facility ("CPF"), pipeline, and well tie-ins continued in H1 2019 with first gas expected in Q4 2019. The CPF has cleared customs in Alexandria and is en route to site at South Disouq, thus achieving the second of the three key project milestones. The final milestone of first gas in Q4 2019 remains on track, subject to the successful installation and hook-up of the CPF, which is scheduled to begin later in August, with the Company aiming for a gross plateau production rate of c.50 MMscfe/d by Q1 2020.
· Discussions continue with our partner relating to the potential exploration drilling programme in South Disouq. A further update will be provided when agreement on the drilling programme is reached.
· In Meseda, following successful drilling of the Rabul-7 development well, a further development well, MSD-19, was spud in early August, and the Company will announce the result of this well in due course. The Company maintains its existing gross production guidance of 4,000-4,200 bbl/d.
· In North West Gemsa, 2019 gross production guidance is maintained at 3,000-3,200 boe/d, with well workovers slowing the rate of natural field decline.
· Planning for the drilling of 12 wells in Morocco is at an advanced stage, with the campaign targeted to begin in Q4 2019 and complete in H1 2020. All long lead items have been ordered and all key contracts finalised. The programme will be targeting 15bcf of gross unrisked prospective resources.
· Morocco gas customers added in late 2018/early 2019 continue to stabilise consumption rates, underpinning 2019 sales guidance of an annual average gross rate of 6.0-6.5 MMscf/d.
· The drilling campaign in Morocco will target sufficient reserves to satisfy existing customers' forecast demands and test new play opening areas of prospectivity across the portfolio.
· H1 2019 net revenues of US$25 million are 4% higher than in H1 2018, with higher production compensating for lower net realised average oil/service fees of US$57/boe, compared to US$62/boe in H1 2018.
· H1 2019 netback of US$18 million was lower than the US$19 million achieved in H1 2018, mainly because of increased workover opex activity in H1 2019 and a greater allocation of costs to opex in H1 2019. These costs were allocated to capex/drilling campaigns in Morocco and NW Gemsa in H1 2018.
· Operating cash flow before capex in H1 2019 remained robust at US$13 million (H1 2018: US$20 million (which was higher as a result of the unwinding of a larger Egyptian Petroleum Company ("EGPC") debtor in the period)), supporting US$19 million of capex invested in the period (H1 2018: US$22 million). Of this US$19 million, US$12 million related to the South Disouq CPF, pipeline and well tie-ins and 3D seismic, US$3 million for customer connections and 3D seismic in Morocco, US$3 million for workovers in Meseda and North West Gemsa and US$1 million for drilling and completion costs at South Ramadan.
· The Company's drilling and development activities set out above are fully funded from expected future cash flows and its existing sources of liquidity.
· Cash at 30 June 2019 was US$11 million, with the US$10 million EBRD facility remaining undrawn.
Mark Reid, CFO and Interim CEO of SDX, commented:
"The Company continues to make good progress toward achieving its three medium-term strategic objectives of securing first gas at South Disouq in Q4 2019, executing an efficient and successful 12-well drilling campaign in Morocco in 2019/20, and continuing with our potential exploration drilling campaign in South Disouq in 2020.
Production and capex from our operations remains within our guided ranges and we look forward to updating the market on the results of our drilling activities in Meseda and Morocco in the coming months. Our cashflow generation, liquidity position, and balance sheet remain strong and continue to provide us with the necessary funding to complete all of these medium-term strategic objectives.
Achieving first gas at South Disouq in Q4 will be transformative for the Company, as we will benefit from our 55% share of the expected production plateau of 50 MMscfe/d from Q1 2020."