· Development of South Disouq (SDX 55% working interest and operator) continues on schedule and on budget, with factory acceptance tests for the central processing facility ("CPF") and compressor, the first of three project milestones, now successfully completed.
· Both pieces of equipment are now commencing the process of being shipped to Egypt with a view to arriving on site at South Disouq in mid-August and on schedule for first gas in Q4'19.
· Interpretation of the South Disouq 3D seismic continues to refine our understanding of prospectivity in the concession. Upon completion of this interpretation and partner discussions, a decision will be made on future drilling.
· Planning for the 12-well drilling campaign in Morocco (SDX 75% working interest and operator) has commenced with long lead items ordered, all key contracts finalised and drilling expected to commence in Q4 2019. The programme will be targeting 15 bcf of gross unrisked prospective resources.
· Gross production for six months to 30 June 2019 in line with FY 2019 guidance:
o Meseda and Rabul: 4,300 bbl/d
o NW Gemsa: 3,900 boe/d
o Morocco: 6.0 MMscf/d
· Cash at 30 June 2019 (unaudited) of US$11.0 million (31 March 2019: US$11.4 million) together with the undrawn US$10 million EBRD facility fully funds SDX for all existing and planned activities.
· The Board has provided Mark Reid, CFO and Interim CEO, with a mandate to deliver first gas at South Disouq during Q4'19 and to successfully execute the Moroccan drilling campaign commencing in Q4'19. To support the execution of this mandate, Mr. Reid has established an experienced Executive Committee which will meet monthly, consisting of the heads of Subsurface & Operations, Facilities and Finance and the Country Managers of Egypt and Morocco. A further update on the CEO position will be provided in due course.
Mark Reid, CFO and Interim CEO of SDX, commented:
"SDX continues to focus on the successful delivery of its key operational targets at the South Disouq development in Egypt and the upcoming Morocco drilling campaign.
We are pleased to report that good progress has been made on these initiatives and both remain on schedule and on budget. Once the South Disouq 3D has been interpreted, and after partner discussions, we will assess the potential for a drilling campaign and update the market in due course.
Our cashflow and receivables collections remain strong and I am pleased to report that all of our existing and planned activities are fully funded from current cash, near-term cash flows and the undrawn EBRD facility. I look forward to providing further updates on our activities during the second half of 2019."
· The first of the three key South Disouq project milestones, the CPF and compressor fabrication in Abu Dhabi and Houston, is now complete and the factory acceptance tests passed.
· The 12" export line to the Egyptian national grid is 100% completed and tested, as are two of the four 6" flowlines from the discovery wells to the CPF.
· Preparations for the second key project milestone, the shipping of the CPF skids from Abu Dhabi and compressor from Houston to Egypt, have commenced and arrival on-site is anticipated in mid-August 2019, subject to satisfactory customs clearance in Egypt.
· The third key South Disouq project milestone, first gas, is expected in Q4 2019 in line with previous guidance, subject to successful assembly, testing and commissioning of the CPF.
· Following a ramp up phase, a gross plateau production rate of c.50 MMscfe/d is being targeted in Q1 2020.
· 3D seismic interpretation is ongoing. During H2'19, the Company will review the final results of the 3D interpretation, undertake partner discussions on a potential drilling campaign and complete an assessment of drilling risk and capital allocation. Upon conclusion of these activities, a decision will be made on a 2020 drilling campaign.
· Planning for the 12-well drilling campaign in Morocco (SDX 75% working interest and operator) targeting 15 bcf of gross unrisked prospective resources has commenced. Long lead items have been ordered with the drilling rig and all other key contracts finalised.
· The campaign is expected to commence in Q4 2019 and is targeting sufficient reserves to satisfy existing customers' forecast demand, as well as testing new play-opening areas of prospectivity across the portfolio.
Other Portfolio Assets
· In Meseda (SDX 50% working interest and joint operator), the Company successfully drilled the Rabul-7 development well which was brought on stream at a stabilised rate of 415 bbl/d of oil. A further development well is planned in H2'19 which, if successful, will provide further support to the Company's reiterated guidance of 4,000-4,200 bbl/d gross.
· In North West Gemsa (SDX 50% working interest), the ongoing workover program is supporting the unchanged 2019 gross production guidance of 3,000-3,200 boe/d.
· The Company's H1'19 production and FY19 production guidance is shown below:
Six months ended 30 June 2019
NW Gemsa - WI 50%
3,000 - 3,200 boe/d
Meseda - WI 50%
4,000 - 4,200 bbl/d
South Disouq - WI 55%
First gas by Q4'19.
c.50 MMscfe/d plateau by Q1'20
Morocco - WI 75%
6.0 - 6.5 MMscf/d 2019 annual average rate
* Reflects stabilised consumption from four out of eight customers. Remaining four customers consumed low volumes of gas in H1'19 and are expected to increase consumption in H2'19
Financial and Corporate
· Cash at 30 June 2019 (unaudited) is c.US$11.0 million (31 March 2019: US$11.4 million) with the US$10 million EBRD facility remaining undrawn.
· FY 2019 Capex guidance is unchanged as follows;
o South Disouq US$35.5 million (gross)/US$19.5 million (net)
o Meseda/Rabul US$5.4 million (gross)/US$2.7 million (net)
o North West Gemsa US$4.0 million (gross)/US$2.0 million (net)
o Morocco US$14.0 million (gross)/US$12.0 million (net)
· Continued reduction in Egyptian receivables to US$7.1 million (unaudited) as at 30 June 2019 (US$14.8 million as at 31 December 2018) with a further US$2.6 million received 2 July 2019.
· SDX remains fully funded for all existing and planned activities.
· Corporate reorganisation completed in May 2019, with re-domiciliation from Canada to the UK, and delisting from TSX-V.