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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Sdx Energy Plc | LSE:SDX | London | Ordinary Share | GB00BJ5JNL69 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 3.55 | 3.50 | 3.60 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMSDX
RNS Number : 7931F
SDX Energy PLC
19 November 2020
THE INFORMATION CONTAINED WITHIN THIS ANNOUNCEMENT IS DEEMED BY SDX TO CONSTITUTE INSIDE INFORMATION AS STIPULATED UNDER THE MARKET ABUSE REGULATION (EU) NO. 596/2014 ("MAR"). ON THE PUBLICATION OF THIS ANNOUNCEMENT VIA A REGULATORY INFORMATION SERVICE ("RIS"), THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.
19 November 2020
SDX ENERGY PLC ("SDX" or the "Company")
ANNOUNCES NINE MONTHS TO 30 SEPTEMBER 2020 FINANCIAL AND OPERATING RESULTS
SDX Energy Plc (AIM: SDX), the MENA-focused oil and gas company, is pleased to announce its unaudited financial and operating results for the nine months ended 30 September 2020. All monetary values are expressed in United States dollars net to the Company unless otherwise stated.
SDX management will be hosting a Capital Markets Day today at 3:00pm UK time, details of which can be found in the release below. A copy of all presentations will be available on the Company's corporate website at www.sdxenergy.com shortly after the event has begun at approximately 3:00pm. The webcast recording of the event will be made available on the Company website shortly thereafter.
Mark Reid, CEO of SDX, commented:
"I am pleased to report another strong period of production and cash generation from our portfolio in what remains a challenging period for businesses globally. Despite this, we reiterate our production guidance for 2020 and feel that we are in a very strong position to continue our excellent cash generation with approximately 90% of revenues being derived from our fixed price gas contracts. Our discovery at the SD-12X well in Egypt towards the beginning of the year is quickly being developed with initial production expected in Q1 2021.
Growth remains a key focus for the Management team at SDX and we were pleased to announce the identification of c.233bcf of close to infrastructure resource in drill-ready prospects at our South Disouq concession. In Q2/Q3 2021, the Company will drill the Ibn Yunus-2 development well to accelerate production from our existing discovered reserve base. Immediately following this, the Hanut prospect will target 139bcf of the 233bcf of newly identified resource and in 2022, two further wells will target another 40 bcf. In line with our ongoing focus on shareholder value creation, we continue to assess the optimum allocation of capital, whether that be investment into organic or inorganic growth projects, or returning capital to shareholders. Our final decision on this will always be taken with the best interests of shareholders in mind.
We remain confident in the Group's outlook and its potential to grow significantly in the months ahead."
Nine months to 30 September 2020 Operations Highlights
-- Average entitlement production of 6,646 boe/d, an increase of 90% from the nine months to 30 September 2019 (3,501 boe/d) and 64% higher than average production during FY 2019 (4,062 boe/d) due to strong production levels mainly from South Disouq, which delivered gross production of 48.6 MMscf/d of dry gas and 467 bbl/d of condensate (51.4 MMscfe/d) equating to 4,710 boe/d net to SDX.
-- Existing full year production guidance is maintained across all assets at 6,000 - 6,250 boe/d, which is 48-54% higher than 2019 actual production and existing full year capex guidance is also maintained at US$26.2 million, the majority of which has already been incurred.
-- The South Disouq two-well drilling campaign was completed during the period, with the second well, SD-12X (100% working interest to SDX), being a commercial discovery in the Kafr el Sheikh formation, and management estimating 24 bcf of recoverable resources. Construction is underway to connect SD-12X to the Company's gas processing plant via a 5.8km flow line to the Ibn Yunus-1X well location with production expected in Q1 2021. Based upon well-test data, it is anticipated that when connected, the well will produce at a stabilised rate of 10-12 MMscf/d.
-- Following further review of the 3D seismic at SD-12X, c.233bcf of close to infrastructure, mean unrisked recoverable volumes, located in productive horizons have been high-graded to ready-to-drill prospects.
-- Subject to receipt of final Ministerial and Parliamentary approval, the Company plans to accelerate its drilling campaign to Q2/Q3 2021 from H1 2022 with the drilling of the Hanut prospect targeting 139bcf. The Company's partner has still to advise whether it will participate in the well. The campaign will commence with the Company and its partner drilling the IY-2X well, a development well accessing reserves in the eastern portion of the Ibn Yunus field, to bring forward production and cash flow from this asset. The Company expects to drill the Mohsen and Warda prospects, targeting 26bcf and 14bcf respectively, in 2022.
-- The period saw the sale of the Group's non-core North West Gemsa asset in Egypt with the net US$1.6 million proceeds exceeding management's expectations as well as showing the ongoing focus and commitment to capital discipline and careful management of the Group's portfolio whilst also providing additional cash to further strengthen its balance sheet.
-- Moroccan drilling campaign has resulted in seven discoveries from nine wells drilled to date, with the tenth well, LMS-2, completed and awaiting crew mobilisation for testing, which is now expected in 2021 due to continued COVID-19 restrictions on moving people and equipment in and out of Morocco.
-- Further analysis of the LMS-2 well results and a re-interpretation of the 3D seismic across SDX's concessions has revealed that structures similar to LMS-2 are present throughout the Company's acreage. This new prospectivity is located in horizons that are slightly deeper than the Company's core production and development area and the areas previously targeted in Lalla Mimouna. Work is ongoing to further define the scale of this prospectivity and, subject to a successful flow test of LMS-2, the intention is to target it as part of the planned 2021 Moroccan drilling campaign which we will also seek to accelerate into H1 2021.
-- Gas consumption levels at SDX's Morocco customers have returned to c.90% of pre-COVID-19 levels.
-- Post period end, the Company agreed to the disposal of its non-core 12.75% working interest in the South Ramadan concession, located offshore in the Gulf of Suez, Egypt. The purchaser, International Oil Services, a private Egyptian oil and gas company, has already paid the US$0.5 million consideration for the Company's interest, which is in excess of management's internal valuation of the asset.
Nine months to 30 September 2020 Financial Highlights
The table below reflects the results from the North West Gemsa concession, which was sold in Q3 2020, as a discontinued operation (as required by IFRS). All revenues, costs and taxation from this asset have been consolidated into a single line item "profit/(loss) from discontinued operations" in both periods reported. Per unit metrics do not include North West Gemsa.
Hot Features
Premium
Nine months ended
30 September (unaudited)
US$ million except per unit 2020 2019
amounts
------------- -------------
Net revenues 33.8 23.7
------------- -------------
Netback(1) 26.6 18.9
------------- -------------
Net realised average oil service
fees - US$/barrel 31.25 49.95
------------- -------------
Net realised average Morocco
gas price - US$/Mcf 10.62 10.32
------------- -------------
Net realised South Disouq gas 2.85 N/A
price - US$/Mcf
------------- -------------
Netback - US$/boe 15.80 43.74
------------- -------------
EBITDAX(1) (2) 23.9 15.1
------------- -------------
Exploration & evaluation expense(3) 5.5 0.8
------------- -------------
Depletion, depreciation, and
amortisation 17.8 12.4
------------- -------------
Profit/(loss) from discontinued
operations 1.9 (0.3)
------------- -------------
Total comprehensive loss (2.2) (0.0)
------------- -------------
Capital expenditure 21.8 26.5
------------- -------------
Net cash generated from operating
activities(4) 14.7 7.7
------------- -------------
Cash and cash equivalents 9.9 12.6
------------- -------------
(1) Refer to the "Non-IFRS Measures" section of this release below for details of Netback and EBITDAX.
(2) EBITDAX for nine months ended 30 September 2020 includes US$4.0 million of non-cash revenue relating to the grossing up of Egyptian corporate tax on the South Disouq and South Ramadan PSCs which is paid by the Egyptian State on behalf of the Company.
(3) US$4.5 million of non-cash Exploration & Evaluation ("E&E") write offs in total are included within this line item.
(4) Excludes discontinued operations.
-- Netback of US$26.6 million, 41% higher than the same period in 2019, was driven by three quarters of production from South Disouq. Morocco Netback was marginally higher despite COVID-19 shutdowns, albeit West Gharib experienced lower production due to increased water cut and lower oil service fee realisations. Operating expenses were US$2.6 million higher predominantly due to South Disouq starting up in November 2019. The lower per unit Netback of US$15.80/boe in 2020 (2019: US$43.74/boe) results from the contribution of South Disouq in 2020 which has high volume, lower Netback production, versus 2019 which did not include South Disouq and therefore reflected a higher proportion of volumes from Morocco, which achieves high Netbacks.
-- EBITDAX of US$23.9 million was 58% higher than the same period in 2019 of US$15.1 million due to higher Netback, lower recurring G&A expenses and lower transaction costs in 2020, partly offset by a non-recurring stock-based compensation credit in 2019 following the departure of two senior employees.
-- Depletion, depreciation and amortisation ("DD&A") charge of US$17.8 million was higher than the US$12.4 million for the same period in 2019 due to South Disouq start up in Q4 2019, partly offset by a reduced charge in Morocco following 2P reserves additions from the recent drilling campaign in Q4 2019/Q1 2020, and lower production.
-- Non-cash E&E write offs totalled US$4.5 million following the drilling of two sub-commercial wells, SD-6X in South Disouq and SAH-5 in Morocco.
-- Operating cash flow (before capex, excluding discontinued operations) of US$14.7 million, higher than the same period in 2019 of US$7.7 million primarily due to the EBITDAX drivers discussed above, offset by an increase in accounts receivable during the period, and higher inventory spend.
-- Capex of US$21.8 million, reflects:
o US$13.0 million (including US$0.5 million of decommissioning provisions) for the Moroccan drilling campaign and well tie-ins;
o US$6.3 million for the drilling of the SD-6X (SDX: 55% working interest) and SD-12X (SDX: 100% working interest) wells in South Disouq (including US$0.2 million of decommissioning provisions and a US$0.3 million development lease bonus for the SD-12X discovery);
o US$0.9 million for the SD-12X tie in project;
o US$0.8 million for additional work and insurance spares at the South Disouq Central Processing Facility ("CPF");
o US$0.5 million for drilling/workovers in West Gharib;
o US$0.2 million for Morocco facilities and customer connections; and
o US$0.1 million for other assets.
-- Liquidity: Closing cash as at 30 September 2020 was US$9.9 million with the US$7.5 million EBRD credit facility remaining undrawn. Following scheduled amortisation, the facility currently has US$2.5 million of availability. In the coming days, the Company is expecting to sign a new facility agreement with EBRD, with a 5-year tenor, which will re-establish US$10.0 million of availability after satisfaction of normal CPs. In the meantime, the existing facility will remain available.
-- Together with cash generated from operations, the Company is fully funded for all of its planned activities in 2020 - 2022.
COVID-19 update
-- During the second half of March 2020 and into April 2020, COVID-19 containment restrictions in Morocco temporarily impacted our operations, with three customers being required to close their operations. However, in early May these same customers re-started production and as at 30 September 2020 had returned to approximately 90% of their pre-closure consumption rates. Whilst some restrictions have been eased, there remains uncertainty as to when production will return to pre-COVID-19 levels and accordingly the Company maintains its full year production guidance for the Moroccan business of 5.3 - 6.0 MMscf/d (gross). Gross consumption for the nine months to 30 September 2020 was 5.9 MMscf/d and the bottom end of the updated guidance of 5.3 - 6.0 MMscf/d (gross) reflects the potential risk of further shutdowns in the remainder 2020 if a second lockdown, or similar, is required. Egyptian production remains unaffected by COVID-19 at present. The Company continues to follow applicable government guidance in each of its territories.
2020 Guidance
-- The Company's 2020 full year guidance is maintained at 6,000 - 6,250 boe/d, which is 48-54% higher than 2019 actual production.
-- 2020 capex guidance is maintained at US$26.2 million (US$21.8 million has been spent to date including the costs of the SD-12X pipeline project which remains on budget).
Outlook
-- The Company is well-placed to weather the current macroeconomic uncertainties and continues to screen a number of business development opportunities.
-- Cash generation is expected to continue strongly through the rest of 2020 and beyond as approximately 90% of the Company's cash flows are expected to be generated from fixed-price gas businesses.
-- 2020, 2021 and 2022 work programmes are fully funded.
-- The Company continues to assess the optimum use of capital in the interests of all stakeholders, whether that be investment into new projects or returning cash to shareholders. At present the Company is focussed on continued investment into new projects and considers this the most appropriate use of the Company's capital. This will be assessed on an ongoing basis.
Operations Update
Nine months to 30 September 2020 Production and Full Year Guidance
-- Nine months to 30 September 2020 actual entitlement production of 6,646 boe/d, an increase of 90% from the same period in 2019, with South Disouq and West Gharib exceeding guidance. An analysis of production by asset is as follows:
Gross production SDX entitlement production
Asset Actual - 9 Guidance Guidance Actual Actual
months ended - 12 months - 12 months 9 months 9 months
30 September ended 31 December ended 31 ended 30 ended 30
2020 2020 December September September
Gross Gross 2020 2020 2019
Entitlement Entitlement Entitlement
-------------------- -------------------- ------------- ------------- -------------
Core assets
-------------------- -------------------- ------------- ------------- -------------
South Disouq - WI 4,300 -
55% 51.4 MMscfe/d 47 - 49 MMscfe/d 4,460 4,710 -
-------------------- -------------------- ------------- ------------- -------------
West Gharib - WI 3,200 - 3,300
50% 3,353 bbl/d bbl/d 610 - 630 639 814
-------------------- -------------------- ------------- ------------- -------------
5.3 - 6.0
Morocco - WI 75% 5.9 MMscf/d MMscf/d 663 - 750 735 772
-------------------- -------------------- ------------- ------------- -------------
Non-core assets
-------------------- -------------------- ------------- ------------- -------------
N/A - now
NW Gemsa - WI 50% N/A - now disposed disposed 385 511 1,915
-------------------- -------------------- ------------- ------------- -------------
South Ramadan -
WI 12.75 % 400 boe/d - 42 51 -
-------------------- -------------------- ------------- ------------- -------------
6,000 -
Total 6,267 6,646 3,501
------------- ------------- -------------
o South Disouq (W.I. 55%) : The South Disouq asset has performed above expectations during the nine months to 30 September 2020, with all four wells flowing ahead of expected rates and the CPF achieving higher than planned levels of uptime. During Q2 2020, a well testing program was carried out as part of scheduled reservoir management activities. Scheduled CPF maintenance is planned for Q4 2020, as are workovers of the SD-4X and SD-1X wells in Q1 2021. These wells are experiencing higher than expected water and sand production respectively and in Q4 2020 they will be produced at lower rates in preparation for the workovers. Notwithstanding this, the Company re-iterates its full year guidance of gross production of 47 - 49 MMscfe/d.
o West Gharib (W.I. 50%): A new production well, Rabul-3, was successfully drilled, completed, and tied into the field production system during H1 2020. Although the existing well stock experienced increasing water cut during the year to date, production was higher than guidance albeit lower than the same period in 2019. Given the above, the Company re-iterates its full year guidance of gross production of 3,200 - 3,300 bbl/d for 2020.
o Morocco (W.I. 75%): As previously reported, following a period of strong demand in January and February, three customers accounting for 50% of normal daily consumption were required to close between mid-March and early May due to COVID-19 restrictions imposed by the Government of Morocco. Since the recommencement of production, these customers have gradually increased their consumption to c.90% of pre-closure levels, which is constrained by ongoing COVID-19 containment measures. The situation in-country remains uncertain and as a result, guidance for this business for FY 2020 is maintained at 5.3 - 6.0 MMscf/d.
o NW Gemsa (W.I. 50%): The Company sold its 50% working interest in this asset in July 2020, with an effective date of 1 April 2020. Gross production to 31 March 2020 was 3,076 boe/d (1,538 boe/d net to SDX), which equates to equivalent actual entitlement production to the Company of 511 boe/d for Q3 2020 and 385 boe/d for the full year. Prior to its sale, the field exceeded expectations, primarily due to a slower rate of pressure depletion and water cut increase.
o South Ramadan (W.I. 12.75%): South Ramadan, situated offshore in the Gulf of Suez, commenced production in Q2 2020 at approximately gross 350 bbl/d. Post completion of an acid stimulation operation, production stabilised at gross 500 - 600 bbl/d.
2020 Drilling and Operations
Morocco drilling campaign update (SDX 75% working interest)
-- Having fulfilled the objectives for the Morocco campaign, being: (i) to add 2P reserves in and around its existing infrastructure; (ii) to determine if its existing producing area extends to the north; and (iii) to test the prospectivity within the Lalla Mimouna concession, the Company decided not to drill the final two planned wells. As these last two wells would not have been immediately tied into the Company's infrastructure or contributed cash flows in the near term, the Company has chosen to preserve its capital and postpone, at no incremental cost, these last two wells for a future campaign.
-- Further analysis of the LMS-2 well results and a re-interpretation of the 3D seismic across SDX's concessions has revealed that structures similar to LMS-2 are present throughout the Company's acreage. This new prospectivity is located in horizons that are slightly deeper than the Company's core production and development area and the areas previously targeted in Lalla Mimouna. Work is ongoing to further define the scale of this prospectivity and, subject to a successful flow test of LMS-2, the intention is to target it as part of the planned 2021 Moroccan drilling campaign which we will also seek to accelerate into H1 2021.
-- The above developments will allow the Company to significantly extend reserve life and continue to support lower CO(2) emissions at our customers.
South Disouq Egypt exploration drilling campaign update (SDX 55% working interest)
-- The Sobhi well is currently being tied in via a 5.8 kilometre connection to the Ibn Yunus-1X location where an existing flow-line connects down to the South Disouq CPF, at an estimated cost of US$3.5 million. The discovery will potentially only require one further development well to be drilled, which will not be necessary for another two to three years. SDX drilled the Sobhi well at a 100% working interest and the total cost of the well, including the cost to complete and test, was US$4.0 million. Management expects the Sobhi well to commence production in Q1 2021.
-- The Company's partner has confirmed that, due to the premium that would be payable if it exercised its back-in rights under the Joint Operating Agreement, it will not participate in the development of the Sobhi discovery.
-- Following the success of SD-12X and further review of the 3D seismic, management has now identified c.233bcf of mean unrisked recoverable volumes, which are close to our existing infrastructure, located in horizons that are either productive in South Disouq or in adjacent blocks and which have now been high-graded to ready-to-drill prospects. This increase of 137bcf from the Company's previous estimate of c.96bcf is primarily attributable to the identification of the Hanut prospect which the Company estimates has an unrisked mean recoverable volumes of 139bcf.
-- Subject to receipt of final Ministerial and Parliamentary approval of the two-year extension to the South Disouq exploration area, which has already been approved by EGAS, the Company plans to accelerate its drilling campaign to Q2/Q3 2021 from H1 2022. The campaign will commence with the drilling of the IY-2X development well in the Ibn Yunus field to accelerate production and cash flows. The Hanut prospect will be drilled immediately afterwards, targeting 139 bcf, with the Mohsen (26 bcf) and Warda (14bcf) wells to be drilled in 2022. The Company's 45% partner will participate in the IY-2X well and has still to confirm whether they will participate in the other proposed wells.
-- Management's estimate of the mean prospective resources and chance of success of the prospects identified in the South Disouq area are shown below.
Prospect Working Interval Concession Comment Unrisked Chance
Name Interest Detail Mean of Success
% (bcf) (%)
Proposed 2 Yr(2)
exploration
Hanut 55-100(1) KES extension Single Target 139 33
---------- --------- -------------------- --------------- --------- ------------
Proposed 2 Yr(2)
exploration
Mohsen 55-100(1) KES extension Single Target 26 51
---------- --------- -------------------- --------------- --------- ------------
Proposed 2 Yr(2)
exploration
El Deeb 55-100(1) Qawasim extension Single Target 22 29
---------- --------- -------------------- --------------- --------- ------------
Proposed 2 Yr(2)
KES/Abu exploration
Ibn Newton/Newton 55-100(1) Madi extension Dual Target 16 40-45
---------- --------- -------------------- --------------- --------- ------------
Up to 25 Yr
Shikabala Development
prospects KES/ Lease to 31 Single Target
(two wells) 100 Qawasim August 2045 & Dual Target 16 25-40
---------- --------- -------------------- --------------- --------- ------------
Up to 25 Yr
Development
Lease to 2 January
Warda 55 KES 2044 Single Target 14 35
---------- --------- -------------------- --------------- --------- ------------
Total 233
---------- --------- -------------------- --------------- --------- ------------
(1) Working interest % dependant on Partner's decision to participate in the extension
(2) Two-year extension period commences on date of Parliamentary approval
West Gharib Egypt exploration drilling campaign update (SDX 50% working interest)
-- During Q1 2020, the Rabul-3 development well in the West Gharib Concession in Egypt was drilled to a total depth of 1,710 metres and encountered approximately 39 metres of net heavy oil pay across the Yusr and Bakr formations. The Yusr and Bakr formations are of excellent reservoir quality with an average porosity of 21%. The well was completed as a producer in mid-April 2020, with both formations being perforated. After connection to the CPF at West Gharib and clean-up, the well has produced at the expected average stabilised rate of approximately 300 bbl/d.
2020 Capex Guidance
-- 2020 capex guidance is maintained at US$26.2 million, as follows:
o US$10.7 million at South Disouq which is for the drilling of two exploration wells (SD-6X: SDX 55% interest and SD-12X: SDX 100% interest), the tie in costs for the successful SD-12X well to the CPF (SDX 100% interest), well workovers, CPF equipment spares and a deposit on the booster compressor planned for South Disouq in 2021. Capex incurred as at 30 September 2020 represents the dry-hole cost of the non-commercial SD-6X well, the costs of drilling, completing and testing the SD-12X discovery well (including decommissioning provision and development bonus), the SD-12X tie in project, and equipment spares for the CPF;
o US$2.0 million for up to three appraisal/development wells in West Gharib; and
o US$13.5 million covering the Morocco drilling campaign, which completed in March, and new well connections and customer infrastructure which are ongoing.
Asset Guidance - Actual - 9
12 months ended months ended
31 December 30 September
2020 2020
South Disouq - US$10.7 million US$8.0 million(1)
WI 55%
----------------- -------------------
West Gharib - WI US$2.0 million US$0.5 million
50%
----------------- -------------------
Morocco - WI 75% US$13.5 million US$13.2 million(2)
----------------- -------------------
Total US$26.2 million US$21.7 million
----------------- -------------------
(1) Includes US$0.2 million of non-cash decommissioning provisions
(2) Includes US$0.5 million of non-cash decommissioning provisions
Nine months to 30 September 2020 Financial Update
-- Netback was US$26.6 million, 41% higher than the Netback of US$18.9 million for the nine months to 30 September 2019, driven by:
o Net revenue increase of US$10.1 million due to:
o US$15.7 million of South Disouq revenue, following production start up in Q4 2019 offset by;
o US$5.6 million lower revenue at West Gharib due to lower realised service fees (2020: US$31.25/bbl, 2019: US$49.95/bbl) and lower production (2020: 639 bbl/d, 2019: 814 bbl/d); and
o US$0.2 million lower revenue in Morocco due to decreased production caused by shutdowns required by COVID-19 restrictions (2020: 735 boe/d, 2019: 772 boe/d)
o Operating costs increasing by US$2.6 million from prior period due to the commencement of production at South Disouq and South Ramadan, partly offset by lower costs at each of the other assets.
-- EBITDAX was US$23.9 million, US$8.8 million (58%) higher than EBITDAX of US$15.1 million for the nine months to 30 September 2019. This increase is due to higher Netback and lower G&A expenses due to the absence in 2020 of transaction costs associated with the Company's redomicile to the UK in 2019 and redundancy costs for two senior employees who left in Q2 2019.
-- The main components of SDX's comprehensive loss of US$2.2 million for the nine months ended 30 September 2020 are:
o US$26.6 million Netback;
o US$5.5 million of E&E expense, of which:
-- US$2.3 million represents the write-off of the sub-commercial SD-6X well in South Disouq, including associated 3D seismic costs;
-- US$2.2 million is the write off of the sub-commercial SAH-5 well in Morocco, including associated 3D seismic costs; and
-- US$1.0 million relates to ongoing new venture activity (predominantly internal management time).
o US$17.8 million of DD&A expense reflects increased charges due to South Disouq start up in Q4 2019, partly offset by a lower charge in Morocco following 2P reserve additions from Q4 2019/Q1 2020 drilling;
o US$2.6 million of ongoing G&A expense, and US$0.1 million of transaction costs associated with the disposal of NW Gemsa;
o US$4.0 million of Egyptian corporation tax predominantly for South Disouq; and
o US$1.9 million profit from discontinued operations representing the result from the NW Gemsa field up to 31 March 2020 prior to its sale, a profit after tax of US$1.1 million, and a US$0.8 million gain on sale.
Operating cash flow (before capex, excluding discontinued operations)
-- Operating cash flow (before capex, excluding discontinued operations) of US$14.7 million, higher than the same period in 2019 of US$7.7 million primarily due to the EBITDAX drivers discussed above, offset by an increase in accounts receivable during the period and cash spent on inventory, the majority of which will be consumed in the next Morocco drilling campaign.
CAPEX
-- US$21.8 million of capital expenditure has been invested into the business during the nine months to 30 September 2020:
o US$13.0 million (including US$0.5 million of decommissioning provisions) for the Moroccan drilling campaign and well tie-ins;
o US$6.3 million for the drilling of the SD-6X (SDX: 55% interest) and SD-12X (SDX: 100% interest) wells in South Disouq (including US$0.2 million of decommissioning provisions and a US$0.3 million development lease bonus for the SD-12X discovery);
o US$0.9 million for the SD-12X tie in project;
o US$0.8 million for additional work and insurance spares at the South Disouq CPF;
o US$0.5 million for drilling/workovers in West Gharib;
o US$0.2 million for Morocco facilities and customer connections; and
o US$0.1 million for other assets.
Liquidity update
-- Closing cash as at 30 September 2020 was US$9.9 million with the US$7.5 million EBRD credit facility remaining undrawn at that time. Post period end, the facility amortised down to US$2.5 million of availability, however in the coming days, the Company is expecting to sign a new facility agreement with EBRD, with a 5 year tenor, which will re-establish US$10.0 million of availability after satisfaction of normal CPs. In the meantime, the existing facility will remain available.
Corporate update
-- The Company is well-placed to weather the current macroeconomic uncertainties and continues to screen a number of business development opportunities.
-- In the period SDX announced the appointment of Catherine Stalker as independent non-executive Director effective 6 February 2020.
-- Q3 2020 saw the sale of the Group's non-core North West Gemsa asset in Egypt with the net US$1.6 million proceeds exceeding management's expectations as well as showing the ongoing focus and commitment to capital discipline and careful management of the Group's portfolio whilst also providing additional cash to further strengthen its balance sheet.
-- Post period end, the Company agreed to the disposal of its non-core 12.75% working interest in the South Ramadan concession, located offshore in the Gulf of Suez, Egypt. The purchaser, International Oil Services, a private Egyptian oil and gas company, has already paid the US$0.5 million consideration for the Company's interest, which is in excess of management's internal valuation of the asset.
KEY FINANCIAL & OPERATING HIGHLIGHTS
Nine months ended
30 September
-------------------------------- --- -----------------------------
2020 2019
$000s except per unit amounts (unaudited) (unaudited)
-------------------------------- ---- ---------------
FINANCIAL
-------------------------------- ---- ---------------
Gross revenues 42,291 24,152
Royalties (8,479) (496)
Net Revenues 33,812 23,656
Operating costs (7,251) (4,714)
Netback (1) 26,561 18,942
EBITDAX (1) 23,862 15,125
Total comprehensive loss (2,207) (23)
Net loss per share - basic $(0.011) $(0.000)
Cash, end of period 9,866 12,589
Capital expenditures 21,762 26,545
Total assets 127,611 139,542
Shareholders' equity 96,452 115,806
Common shares outstanding
(000's) 205,378 204,723
OPERATIONAL
-------------
NW Gemsa sales (bbl/d) 511 1,915
West Gharib production service
fee (bbl/d) 639 814
South Disouq gas sales (boe/d) 4,453 -
Morocco gas sales (boe/d) 735 772
Other products sales (boe/d) 308 -
-------------------------------- ---- ------------- ---------------
Total sales volumes (boe/d) 6,646 3,501
-------------------------------------- ------------- ---------------
Realised West Gharib service
fee (US$/bbl) $31.25 $49.95
Realised South Disouq gas
price (US$/Mcf) $2.85 -
Realised Morocco gas price
(US$/Mcf) $10.62 $10.32
Royalties ($/boe) $5.04 $1.15
Operating costs ($/boe) $4.31 $10.89
Netback ($/boe) (1) $15.80 $43.74
(1) Refer to the "Non-IFRS Measures" section of this release below for details of Netback and EBITDAX.
About SDX
SDX is an international oil and gas exploration, production, and development company, headquartered in London, United Kingdom, with a principal focus on MENA. In Egypt, SDX has a working interest in two producing assets: a 55% operated interest in the South Disouq gas field in the Nile Delta and a 50% non-operated interest in the West Gharib concession, which is located onshore in the Eastern Desert, adjacent to the Gulf of Suez. In Morocco, SDX has a 75% working interest in five development/production concessions, all situated in the Gharb Basin. The producing assets in Morocco are characterised by attractive gas prices and exceptionally low operating costs. SDX has a strong weighting of fixed price gas assets in its portfolio with low operating costs and attractive margins throughout, providing resilience in a low commodity price environment. SDX's portfolio also includes high impact exploration opportunities in both Egypt and Morocco.
For further information, please see the Company's website at www.sdxenergy.com or the Company's filed documents at www.sedar.com .
Competent Persons Statement
In accordance with the guidelines of the AIM Market of the London Stock Exchange, the technical information contained in the announcement has been reviewed and approved by Rob Cook, VP Subsurface of SDX. Dr. Cook has over 25 years of oil and gas industry experience and is the qualified person as defined in the London Stock Exchange's Guidance Note for Mining and Oil and Gas companies. Dr. Cook holds a BSc in Geochemistry and a PhD in Sedimentology from the University of Reading, UK. He is a Chartered Geologist with the Geological Society of London (Geol Soc) and a Certified Professional Geologist (CPG-11983) with the American Institute of Professional Geologists (AIPG).
For further information:
SDX Energy Plc Mark Reid Chief Executive Officer Tel: +44 203 219 5640 Stifel Nicolaus Europe Limited (Nominated Adviser and Joint Broker) Jason Grossman Ashton Clanfield Fred Walsh Tel: +44 (0) 20 7710 7600 Peel Hunt LLP (Joint Broker) Richard Crichton David McKeown Tel: +44 (0) 207 418 8900 Camarco (PR) Billy Clegg/Owen Roberts/Violet Wilson Tel: +44 (0) 203 757 4980 Capital Markets Day call details Date: 19 November 2020 Time: 3:00pm GMT To register and login for the event, please use this link: https://webcasting.brrmedia.co.uk/broadcast/5fad284cbe1fd642a3ef0f4d The presentation will be made available our website; https://www.sdxenergy.com/investors/results-centre/
Glossary
"bbl" stock tank barrel
"bbl/d" barrels of oil per day
------------------------------
"bcf" billion cubic feet
------------------------------
"boe/d" barrels of oil equivalent per
day
------------------------------
"Mcf" thousands of cubic feet
------------------------------
"MMscf/d" million standard cubic feet
per day
------------------------------
"MMscfe/d" million standard cubic feet
equivalent per day
------------------------------
"2P" proved plus probable reserves
------------------------------
Forward-looking information
Certain statements contained in this press release may constitute "forward-looking information" as such term is used in applicable Canadian securities laws. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or are not statements of historical fact should be viewed as forward-looking information. In particular, statements regarding the Company's 2020 production and capex guidance, liquidity and sources of cash flows in 2020 and 2021, the sufficiency of reserves to fulfill existing customer contracts, the impact of COVID-19 on customer consumption, future drilling developments and results, and extending the tenor and re-establishing the full availability of the US$10 million credit facility with the EBRD should all be regarded as forward-looking information.
The forward-looking information contained in this document is based on certain assumptions, and although management considers these assumptions to be reasonable based on information currently available to them, undue reliance should not be placed on the forward-looking information because SDX can give no assurances that they may prove to be correct. This includes, but is not limited to, assumptions related to, among other things, commodity prices and interest and foreign exchange rates; planned synergies, capital efficiencies and cost - savings; applicable tax laws; future production rates; receipt of necessary permits; the sufficiency of budgeted capital expenditures in carrying out planned activities, and the availability and cost of labour and services.
All timing given in this announcement, unless stated otherwise, is indicative, and while the Company endeavours to provide accurate timing to the market, it cautions that, due to the nature of its operations and reliance on third parties, this is subject to change, often at little or no notice. If there is a delay or change to any of the timings indicated in this announcement, the Company shall update the market without delay.
Forward-looking information is subject to certain risks and uncertainties (both general and specific) that could cause actual events or outcomes to differ materially from those anticipated or implied by such forward - looking statements. Such risks and other factors include, but are not limited to, political, social, and other risks inherent in daily operations for the Company, risks associated with the industries in which the Company operates, such as: operational risks; delays or changes in plans with respect to growth projects or capital expenditures; costs and expenses; health, safety and environmental risks; commodity price, interest rate and exchange rate fluctuations; environmental risks; competition; permitting risks; the ability to access sufficient capital from internal and external sources; and changes in legislation, including but not limited to tax laws and environmental regulations. Readers are cautioned that the foregoing list of risk factors is not exhaustive and are advised to refer to the Principal Risks & Uncertainties section of SDX's Annual Report for the year ended 31 December 2019, which can be found on SDX's SEDAR profile at www.sedar.com , for a description of additional risks and uncertainties associated with SDX's business.
The forward-looking information contained in this press release is as of the date hereof and SDX does not undertake any obligation to update publicly or to revise any of the included forward -- looking information, except as required by applicable law. The forward -- looking information contained herein is expressly qualified by this cautionary statement.
Non-IFRS Measures
This news release contains the terms "Netback," and "EBITDAX" which are not recognized measures under IFRS and may not be comparable to similar measures presented by other issuers. The Company uses these measures to help evaluate its performance.
Netback is a non-IFRS measure that represents sales net of all operating expenses and government royalties. Management believes that Netback is a useful supplemental measure to analyze operating performance and provide an indication of the results generated by the Company's principal business activities prior to the consideration of other income and expenses. Management considers Netback an important measure as it demonstrates the Company's profitability relative to current commodity prices. Netback may not be comparable to similar measures used by other companies.
EBITDAX is a non-IFRS measure that represents earnings before interest, tax, depreciation, amortization, exploration expense and impairment. EBITDAX is calculated by taking operating income/(loss) and adjusted for the add-back of depreciation and amortization, exploration expense and impairment of property, plant, and equipment (if applicable). EBITDAX is presented in order for the users to understand the cash profitability of the Company, which excludes the impact of costs attributable to exploration activity, which tend to be one-off in nature, and the non-cash costs relating to depreciation, amortization and impairments. EBITDAX may not be comparable to similar measures used by other companies.
Oil and Gas Advisory
Certain disclosures in this news release constitute "anticipated results" for the purposes of National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities ("NI 51-101") of the Canadian Securities Administrators because the disclosure in question may, in the opinion of a reasonable person, indicate the potential value or quantities of resources in respect of the Company's resources or a portion of its resources. Without limitation, the anticipated results disclosed in this news release include estimates of volume, flow rate, production rates, porosity, and pay thickness attributable to the resources of the Company. Such estimates have been prepared by Company management and have not been prepared or reviewed by an independent qualified reserves evaluator or auditor. Anticipated results are subject to certain risks and uncertainties, including those described above and various geological, technical, operational, engineering, commercial, and technical risks. In addition, the geotechnical analysis and engineering to be conducted in respect of such resources is not complete. Such risks and uncertainties may cause the anticipated results disclosed herein to be inaccurate. Actual results may vary, perhaps materially.
Use of the term "boe" or the term "MMscf" may be misleading, particularly if used in isolation. A "boe" conversion ratio of 6 Mcf: 1 bbl and a "Mcf" conversion ratio of 1 bbl: 6 Mcf are based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
Prospective Resources Data
The prospective resources estimates disclosed or referenced herein have been prepared by Dr. Rob Cook, a qualified reserves evaluator, in accordance with the SPE's Canadian Oil and Gas Evaluation Handbook and in accordance with NI 51-101. The prospective resources disclosed herein have an effective date of 1 January 2020. Prospective resources are those quantities of gas, estimated as of the given date, to be potentially recoverable from undiscovered accumulations through future development projects. As prospective resources, there is no certainty that any portion of the resources will be discovered. The chance that an exploration project will result in a discovery is referred to as the "chance of discovery" as defined by the management of the Company.
There is no certainty that it will be commercially viable to produce any portion of the resources discussed herein; though any discovery that is commercially viable would be tied back to the Company's pipeline in Morocco and then connected to customers' facilities within 9 to 12 months of discovery. Based upon the economic analysis undertaken on any discovery, management has attributed an associated chance of development of 100%.
There are uncertainties associated with the volume estimates of the prospective resources disclosed herein, due to the level of information available on prospective resources, but ranges are defined based on data from the Company's nearby existing analogous wells. Some of the risks and uncertainties are outlined below:
-- Petrophysical parameters of the sand/reservoir; -- Fluid composition, especially heavy end hydrocarbons; -- Accurate estimation of reservoir conditions (pressure and temperature); -- Reservoir drive mechanism; -- Potential well deliverability; and
-- The thickness and lateral extent of the reservoir section, currently based on 3D seismic data.
"P50" means that there is at least a 50% probability that the quantities actually recovered will equal or exceed the best estimate.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
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