Sdx Energy Share Discussion Threads

[tournesol] 30/5/2017 07:59

We can cross-check SDX's valuation - mentioned in my previous post above - against the research notes written by Progressive Equity and available via SDX's website - (The link is at

The most recent of those notes said:
...Prior to drilling the SD-1X well, the gross mean prospective resources were estimated at 490 BCF of gas and 16.3 mmbbl of condensate (100 mmboe). The net pay and porosity of the reservoir were in line with pre-drill expectations. The SD-1X well also de-risks the 4 - 5 lookalike structures on the block.

In the event of successful testing results and the volumes being in line with the pre-drill gross mean prospective resources, this could add a potential net 55 mmboe to the group’s reserves which are currently standing at approximately 12 mmboe. This would be a major boost to the company’s reserve base….
source:
www.progressive-research.com/tearsheet/research/sdx-energy/sdx-energy-q1-2017-earnings


The previous note said:
...Prior to the drilling of this well, we had valued this prospect on a risk adjusted basis using the industry standard valuation of discounted cash flow analysis. We had used the volumes and risks that had been assumed by its previous reserve auditor (DeGoyler & MacNaughton) who had assessed the gross mean prospective resources of 490 BCF of gas and 16.3 mmbbl of condensate with a chance of success of approximately 1 in 7. Using these metrics we had placed a risked valuation on this prospect of approximately 19p/share out of a total valuation of 83p/share for the company. Clearly the discovery of gas will have changed the risk profile of this well. However, we will not change our valuation until we have seen the results of the testing programme and we have a better understanding of the volumetrics of this potential discovery. We had not assumed any upside from the potential oil horizon in this valuation.
source:
www.progressive-research.com/tearsheet/research/sdx-energy/sdx-energy-completes-drilling-sd-1x


So Progressive were saying that the figures produced by DeG & N (who are very well respected) implied that the prospect at SD-1X had a
risked value = 19p/share
chance of success = 1:7
unrisked value = 133p/share (19x7)

I think that 19p and 23 p are close enough here. The difference between the 23p used by SDX themselves and the DeG & N derived figure of 19p can be explained as being either the difference between the individual prospect (DeG & N) and the wider area (ie SDX were being v conservative about the wider area) or simply different assumptions for the forward price of gas; lead time; or costs to get to production.

The big takeaway for us is that SD-1X alone - excluding the rest of the South Disouq wider area - will be worth more than £1 per share. It does not imply that such a value should be attributed immediately. There is still risk and there will be risk until production gets started. But the risk is very much less than 1:7 it must at the very least be better than 1:2 and that implies a current valuation of 66p for SD-1X alone.

I expect fireworks today and in the next few weeks.

[pauliewonder] 30/5/2017 07:54

SDX Energy hails better than expected well test on Egypt licenceShare 07:30 30 May 2017It is working to get SD-1X, which tested 82 feet on net pay, into commercial production as soon as possible.SDX Energy hails better than expected well test on Egypt licence The company wants to get the well into commercial production as soon as possibleSDX Energy Inc. (LON:SDX, CVE:SDX) hailed the "highly positive" test of its well on the South Disouq licence, Egypt, which flowed a better-than-expected 25.8mln standard cubic feet (scf) of dry gas.It is working to get SD-1X, which tested 82 feet on net pay, into commercial production as soon as possible.Before that it will been shut in for an initial build-up - a pre-cursor to a series of additional flow periods from which samples will be taken.Development plan The results from this programme will be integrated to reserve evaluation work, which will be integrated into an early development plan.Chief executive Paul Welch said: "Underpinned by the strong local gas demand, today's news is highly positive and confirms the overall success of the recent SD-1X campaign. "Not only do we have this excellent result in the upper Abu Madi section, we also remain very upbeat about the oil potential in the deeper Cretaceous horizon, where a working petroleum system was also discovered."Additional potentialHe said while the work of bringing the gas discovery into production is SDX's primary focus, the firm is also planning for further drilling in the lower Cretaceous-age horizons where it sees "additional potential".South Disouq remains is just one strand in the SDX story.It is are "extremely active" across the rest of its North Africa portfolio, which will include development and exploration drilling in Morocco in the next quarter. "We look forward to providing further updates over the coming months," said Welch.The company owns 55% of South Disouq and is operator of the licence.

[tournesol] 30/5/2017 01:58

The presentation recently given in Edinboro (a few days before the AGM) was taken down from the SDX website a day a day or so later. (This is why I always download material of interest rather than hope it stays online indefinitely).

The Edinboro slides (p27) included a sum-of-the-parts valuation for SDX, as follows:

NW Gemsa $21.5 million
Meseda $36 million
Morocco $58.5 million
Working Capital $41.6 million
———;——̵2;——R12;——212;——————————----------—
A) Core NAV $157.6 million
———;——̵2;——R12;——212;———-------———————;——

South Ramadan $3 million
South Disouq $54.1 million
———;——̵2;——R12;—--------------———————
B) Exploration Upside $57.1 million
———;——̵2;---------------212;—————————

==================================
A+B) Total RENAV $214.7 million = £0.93p/share
==================================


Simple arithmetic on the above tells us that= SDX's pre-drill estimate of the risked value of South Disouq was 23p/share

A risked value is just a fraction of the unrisked potential. So successful testing unlocks a considerable uplift.

[tournesol] 30/5/2017 01:27

Public Heel

you said "I guess I'm still a little shell-shocked at the nasty drops in Gemsa and Meseda valuations in the last presentation"

Could you expand on that please?

[thegreatgeraldo] 29/5/2017 23:55

Can't see any reason for it to drift... there's always the chance that a well won't flow due to well skin damage or something unforeseen, that's not the case. I assume there's confidence behind the 10mmbbls of condensate statement at the AGM, so logically it should tick up in anticipation of the next update. Still, markets don't always behave in a logical manner... time will tell, as ever!

[neo26] 29/5/2017 23:36

This is an significant find, can easily propel the share price close to £1.

[thegreatgeraldo] 29/5/2017 23:03

Still think they've tested all/most of the net pay - you don't wait for a pressure build-up to test a zone you haven't tested. Look forward to the next news with hopefully more detail on the gas/liquid mix

[cashandcard] 29/5/2017 22:45

Tgg,Thanks, that would put it into perspective. Largest reservoir netpayzone has been tested then. I await results of further testing and sampling. Cash

[thegreatgeraldo] 29/5/2017 22:42

Cash, see where you're coming from. However, in the discovery RNS the company had this to say,

"Following the significant natural gas discovery in the upper Abu-Madi section, where the well encountered 65 ft. of net pay section with an average porosity of 25%, drilling continued with the SD-1X well which was subsequently targeting oil from the deeper Cretaceous horizons."

Obv net pay has subsequently been increased.

[krobertson878] 29/5/2017 22:40

10.4% rise in Toronto today

[krobertson878] 29/5/2017 22:40

Decent rise

[cashandcard] 29/5/2017 22:33

Tgg,What makes me say that? PW's statement at the bottom of the RNS 're. Upper Abu-Madi.I may have read it wrong.Cash

[thegreatgeraldo] 29/5/2017 21:31

cashandcard
29 May '17 - 20:26 - 2928 of 2938 1 0



They have only tested the upper Abu Madi section but fail to detail the parameters of the section under test. It could well be the lower Abu Madi is also flowed and tested with liquids content.

...cash, what makes you think this? They refer to further testing after what may have been a test lasting just a few hours. In the absence of any statement to the contrary in the RNS, I assume they've tested most of the net pay. They're now waiting for pressure to build up before doing more testing & will take samples to further understand what the reservoir holds (NGLs, condensate)

[thegreatgeraldo] 29/5/2017 21:05

Maybe confusion between market price & netback? As I've been pointing out this evening, given the govt take, it makes more sense to focus on netbacks

[public heel] 29/5/2017 21:03

Sheep_Herder - Are you using the price SDX is getting at Gemsa? I think that's a special situation, but I don't know the details. If the price was really ~$1.00-$1.50, no one would be drilling....

[public heel] 29/5/2017 21:00

Deltrotter - yes, unlikely. I guess I'm still a little shell-shocked at the nasty drops in Gemsa and Meseda valuations in the last presentation, and I'm too ready to believe the worst about them.

[soulsauce] 29/5/2017 20:45

A bit tetchy on here this evening. Chill guys we are on to a great thing here. No need for all the speculation this soon. SD has huge potential and that potential will out in to a much higher share price in time. As for being annoyed as to whether to buy or not because condensate has not been mentioned, have a word with yourself :-/

[sheep_herder] 29/5/2017 20:44

There's a 9X difference in the price per MCF for Morocco and Egypt.

[public heel] 29/5/2017 20:43

Cash - Interesting thought about the difference between upper and lower sections.

Tom111 - If you think the difference between dry gas and very wet gas (which is what 70 bbl/mmcf is) is not worth mentioning, perhaps you should run the numbers, or get someone to do it for you.

[deltrotter] 29/5/2017 20:37

Surely they are unlikely to go from thinking there are 10mboe condensate to there are actually being 0boe?

[tom111] 29/5/2017 20:37

They come out with a very positive report and and the nit pickers appear out of the wood work,pathetic

[saw89] 29/5/2017 20:29

That's right Cash, still more testing to be completed, lets not get too carried away. And as for outlandsih revenue forecasts, we can all do without that..

[sheep_herder] 29/5/2017 20:27

Brasso - I think you should have been using the $41/boe price that is in the Q1 results. However, that doesn't take into account the net price per MCF is way lower in Egypt than Morocco so that will skew the results to the down side.

I think I'm probably more on TGG's side regarding your optimism.