SDX Energy PLC – Q3 2019 Financial and Operating Results

SDX Energy PLC – Q3 2019 Financial and Operating Results

SDX Energy Plc (AIM: SDX), the MENA-focused oil and gas company, announces its financial and operating results for the three and nine months ended 30 September 2019. All monetary values are expressed in United States dollars net to the Company unless otherwise stated.   

 

Summary

 

Operations

 

·      Production for the nine months ended 30 September 2019 increased to 3,501 boe/d, net to SDX, compared with 3,455 boe/d for the same period in 2018.  The increase was due to an 18% increase at Meseda as a result of successful drilling, a 20% increase in Morocco due to increases in customers and customer consumption rates, and offset by a 10% decrease at North West Gemsa primarily as a result of increased water cut across the field as previously announced.

 

·      On 7 November 2019, first gas was achieved from the South Disouq gas field in Egypt (SDX: 55% working interest and operator) with production increasing ahead of expectations from c.24 MMscfe/d to c.35 MMscfe/d in the first two weeks of operations.

 

Egypt

 

·      At South Disouq, the Company will continue to gradually ramp up production, targeting a gross plateau production rate of c.50 MMscfe/d in Q1 2020. During 2020, and subject to final partner discussions, the Company is planning to drill up to three exploration wells in the South Disouq concession. 

·      At Meseda (SDX: 50% working interest, 19.06% entitlement interest and joint operator), the Company maintains its existing gross production guidance of 4,000-4,200 bbl/d following successful drilling of the Rabul-7 and Meseda-19 development wells in the first nine months of 2019.

 

·      At North West Gemsa (SDX: 50% working interest and non-operator), 2019 gross production guidance is maintained at 3,000-3,200 boe/d, with well workovers slowing the rate of natural field decline.

 

 

Morocco

 

·      On 25 October 2019, the Company announced the start of a 12-well drilling campaign, targeting a mean 15 bcf of gross unrisked prospective resources, in its operated Gharb Basin acreage in Morocco (SDX: 75% working interest).  

 

·      The drilling campaign, which is expected to complete in Q1 2020, will target reserves sufficient to satisfy forecast demand based on existing customers and test new play opening areas of prospectivity across the portfolio.

 

·      Morocco gas customers added in late 2018 and early 2019 continue to increase consumption rates. Gross sales gas of 6.6 MMscf/d was achieved in the three months ended 30 September 2019, with this increasing to 7.0 MMscf/d for the month of October 2019. As a result, gross gas consumption for the nine months ended 30 September 2019 has increased to 6.2 MMscf/d, underpinning the 2019 sales guidance of an annual average gross rate of 6.0-6.5 MMscf/d.

 

Financial

 

·      Net revenues for the nine months ended 30 September 2019 of US$38 million are US$2 million (approximately 5%) lower than in the 2018 comparative period. This reduction in net revenues is due to lower net realised average oil/service fees of US$56/boe, compared to US$64/boe in 2018, which were offset by a small increase in production in the nine months ended 30 September 2019.

 

·      In the nine months ended 30 September 2019, the Company achieved a netback of US$27 million, US$4 million lower than the US$31 million achieved in the 2018 comparative period. This reduction was due to the US$2 million revenue reduction explained above and increased opex in the period, resulting from increased production and workover activity and a greater allocation of costs to opex in the nine months ended 30 September 2019. In the 2018 comparative period, these costs were allocated to capex and drilling campaigns in Morocco and North West Gemsa.

 

·      Operating cash flow before capex in the nine months ended 30 September 2019 remained robust at US$18 million (2018: US$27 million), which was due to the strong netback explained above and as a result of the continued reduction of Egyptian Petroleum Company (“EGPC”) receivables in the period. 

 

·      Operating cash flow supported US$23 million of capex invested in the period (2018: US$35 million). Of this US$23 million, US$14 million related to the South Disouq central processing facility (“CPF”), pipeline and well tie-ins and 3D seismic, US$5 million for drilling, customer connections, and 3D seismic in Morocco, US$2 million for workovers in Meseda and North West Gemsa, and US$2 million for drilling and completion costs at South Ramadan.

 

·      The Company’s forecast drilling and development activities set out above are fully funded by expected future cash flows and the Company’s existing sources of liquidity.

 

·      Cash at 30 September 2019 was US$13 million, with the US$10 million European Bank for Reconstruction and Development (“EBRD”) credit facility remaining undrawn.

 

·      In line with its amortisation schedule, availability under the EBRD credit facility was reduced to US$7.5 million post-period end. Discussions are underway with the EBRD to extend the tenor and re-establish the US$10 million availability under the facility.

Mark Reid, CEO of SDX, commented:   

“Achieving first gas at South Disouq earlier this month was a major milestone for SDX and it is anticipated to have a material impact on the Company’s cash generation going forward. Furthermore, we are pleased with the performance of the wells and the facility in the first two weeks of operation and this has resulted in a rate of production increase that has exceeded our expectations. Notwithstanding this accomplishment, we remain focused on the delivery of our other two medium-term strategic objectives of executing an efficient and successful 12-well drilling campaign in Morocco and progressing our planned exploration drilling campaign in South Disouq in 2020.

We are also pleased to report that production and capex from our operations continue to be within our guided ranges and our cashflow generation, liquidity position, and balance sheet remain strong and continue to provide us with the necessary funding to pursue these remaining two medium-term strategic objectives.

With the planned ramp-up of production in South Disouq to 50 MMscfe/d in Q1 2020, together with the drilling campaigns in Morocco and South Disouq, the remainder of 2019 and 2020 will be a very busy and exciting period for SDX and we look forward to providing the market with further updates in due course.”

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