TIDMSDX
RNS Number : 2418J
SDX Energy PLC
20 August 2021
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20 August 2021
SDX ENERGY PLC ("SDX", the "Company" or the "Group")
ANNOUNCES ITS FINANCIAL AND OPERATING RESULTS FOR THE THREE AND
SIX MONTHSED 30 JUNE 2021
SDX Energy Plc (AIM: SDX), the MENA-focused oil and gas company,
is pleased to announce its unaudited financial and operating
results for the three and six months ended 30 June 2021. All
monetary values are expressed in United States dollars net to the
Company unless otherwise stated.
Mark Reid, CEO of SDX, commented:
"I am very pleased to report first half 2021 results that show
strong growth in revenue, netback, EBITDAX and operating cash flows
versus the same period in 2020, as well as ending the period with a
strong liquidity position. The producing assets in Egypt and
Morocco are performing well and we remain above our mid-point
guidance for the year. Our drilling activities have yielded three
successful wells in Morocco, all of which are now onstream and
contributing to cash flow, and one at South Disouq, which is due to
start up shortly. As previously announced, whilst the result of the
Hanut-1X well is disappointing, I remain positive about the
remaining prospectivity in the area which has not been materially
impacted."
Three and six months to 30 June 2021 Operations Highlights
-- H1 2021 entitlement production of 5,931 boe/d was 3% higher
than 2021 mid point market guidance of 5,770 boe/d and 4% lower
than H1 2020 mainly due to natural decline, well workovers and
expected sand and water production in two of the five wells at
South Disouq.
-- Capex guidance for Morocco for the 12 months ended 31
December 2021 has been increased by US$1.5 million as wells planned
for the second phase of 2021 drilling are deeper than those
included in the original guidance. Capex of US$15.8 million was
within guidance for South Disouq and West Gharib. This results in
group 2021 capex guidance being revised to US$26.5 - 28.0 million
(previous guidance US$25.0 - 26.5 million).
-- The Company's operated assets recorded a carbon intensity of
2.7kg CO(2) e/boe in H1 2021 which is one of the lowest rates in
the industry. Scope 1 greenhouse gas emissions at operated assets
were 4,405 tons of CO(2) e. Scope 3 greenhouse gas emissions in
Morocco were 75,500 tons of CO(2) e, which is approximately 38,500
tons of CO(2) e less than using alternative heavy fuel oil.
-- In South Disouq, the IY-2X step-out development well, the
first of a two-well campaign, was spud in late June 2021. The well
was drilled to a measured depth of 8,025 feet, encountering 40.5
feet net-pay of high-quality gas-bearing sands, with an average
porosity of 23.4%, near the base of the Kafr El Sheikh ("KES")
formation. The top of the KES sand was encountered at a measured
depth of 6,768 feet. Following well te sting, the well is expected
to be brought on production during the last week in August with a
view to maximising recovery from the Ibn Yunus Field and helping to
maintain current gross production levels of c.45MMscfe/d at the
South Disouq Central Processing Facility (the "CPF").
-- Post-period end, the second well, the Hanut-1X ("HA-1X")
exploration well, spudded on 4 August and reached the target depth
of 6,000ft on 17 August. The primary target for HA-1X was the Basal
Kafr El Sheikh sand at approximately 5,200ft. The well however
found that the Basal Kafr El Sheikh sand had been eroded at this
location. Whilst drilling to target depth, good quality sands were
found at the Qawasim level, however they were not charged with gas.
SDX considers the result of the HA-1X well to have limited impact
on the remaining c.90-100bcf of prospectivity in the SDX acreage at
South Disouq.
-- Following the IY-2X and HA-1X well results, during H2 2021
the Company will evaluate the current and future prospectivity of
the South Disouq concession to assess whether there is evidence
that the carrying value of the asset should be impaired.
-- In West Gharib, following the ten-year concession extension
granted earlier in 2021, preparations continued for a campaign of
three to four development wells, the first of which is expected to
spud in early Q4.
-- The first phase of the Morocco drilling campaign, which
consisted of three appraisal/development wells in SDX's operated
Gharb Basin acreage in Morocco (SDX: 75% working interest), was
successfully completed in June 2021.
-- The OYF-3, KSR-17 and KSR-18 wells were all commercial
successes, with OYF-3 and KSR-17 already connected as at 30 June
2021 and producing into the Company's infrastructure. KSR-18 has
been tested and was connected at the end of July 2021. Management
estimates that 1.5-1.6bcf of gross resources have been added by
these wells, which is in line with pre-drill P50 estimates.
Preparations are underway for the drilling of up to two additional
wells in Morocco later in the year.
-- As previously announced, during the first half of the year,
the Company received the COVID-19 delayed laboratory analysis of
the cuttings and sidewall cores from the LMS-2 well. This
information confirmed that LMS-2 had successfully encountered the
targeted thermogenic gas source that exists in the Top Nappe
horizon but that the reservoir in the Lalla Mimouna Nord concession
has low permeability and the well is unlikely to flow
conventionally. As such, the Company will not risk US$0.5 million
testing this well, nor will it commit to further investment in the
Lalla Mimouna Nord concession post the end of the concession date
in July 2021 as a result of the limited likelihood of it being
commercially developed. Accordingly, the Company has recognised a
US$10.3 million non-cash impairment charge in Q2 ahead of
relinquishment of the concession, of which US$2.8 million relates
to LMS-2.
Six months to 30 June 2021 Financial Highlights
The table below reflects the unaudited results of the Company
for the three and six months ended 30 June 2021 and 2020. The North
West Gemsa and South Ramadan concessions, which were sold in Q3 and
Q4 2020 respectively, are classified as discontinued operations (as
required by IFRS). All revenues, costs and taxation from these
assets have been consolidated into a single line item
"(loss)/profit from discontinued operations" in both periods
reported. Per unit metrics do not include North West Gemsa or South
Ramadan.
Three months Six months ended
ended 30 June
30 June
US$ million, except per unit 2021 2020 2021 2020
amounts
------- ------ --------- --------
Net revenues 13.7 9.2 27.1 21.9
------- ------ --------- --------
Netback(1) 11.4 7.3 22.1 17.6
------- ------ --------- --------
Net realised average oil service
fees - US$/barrel 54.61 20.94 51.10 30.18
------- ------ --------- --------
Net realised average Morocco
gas price - US$/Mcf 11.49 10.40 11.40 10.35
------- ------ --------- --------
Net realised South Disouq gas
price - US$/Mcf (2) 2.83 2.85 2.85 2.85
------- ------ --------- --------
Netback - US$/boe 20.81 13.79 20.61 15.65
------- ------ --------- --------
EBITDAX(1)(3) 10.1 6.3 19.9 15.7
------- ------ --------- --------
Exploration & evaluation expense
("E&E") (4) (10.6) (0.3) (10.9) (5.1)
------- ------ --------- --------
Depletion, depreciation, and
amortisation ("DD&A") (7.5) (5.2) (14.9) (12.0)
------- ------ --------- --------
Total comprehensive loss (10.7) (0.8) (10.1) (4.0)
------- ------ --------- --------
(Loss)/Profit from discontinued
operations - (0.4) - 0.7
------- ------ --------- --------
Capital expenditure 11.9 3.8 15.8 19.4
------- ------ --------- --------
Net cash generated from operating
activities(5) 8.8 5.5 14.9 10.4
------- ------ --------- --------
Cash and cash equivalents 9.1 9.3 9.1 9.3
------- ------ --------- --------
(1) Refer to the "Non-IFRS Measures" section of this release
below for details of Netback and EBITDAX.
(2) South Disouq gas is sold to the Egyptian State at a fixed
price of US$2.65 MMbtu, which equates to approximately US$2.85/Mcf.
During the three months ended 30 June 2021, a small quantity of
off-specification gas was produced, which reduced the realised
price for this period to US$2.83/Mcf.
(3) EBITDAX for six months ended 30 June 2021 and 2020 includes
US$2.6 million and US$2.7 million respectively of non-cash revenue
relating to the grossing up of Egyptian corporate tax on the South
Disouq PSC which is paid by the Egyptian State on behalf of the
Company (respectively US$1.4 million and US$1.3 million for the
three months ended 30 June 2021 and 2020).
(4) For the six months ended 30 June 2021, US$10.3 million of
non-cash Exploration & Evaluation ("E&E") impairment is
included within this line item (US$4.5 million for the six months
ended 30 June 2020).
(5) Excludes discontinued operations.
-- Netback of US$22.1 million, 26% higher than the same period
in 2020 of US$17.6 million, was primarily driven by strong demand
in Morocco, which during H1 2020 was impacted by temporary COVID-19
shutdowns at three customers. West Gharib netback increased due to
higher service fee realisations, which outweighed the impact of
lower production due to natural decline. These factors were partly
offset by a lower netback at South Disouq as a result of lower
production due to natural decline and well management activity,
including workovers.
-- EBITDAX of US$19.9 million was 27% higher than the same
period in 2020 of US$15.7 million due to the netback factors
described above.
-- Depletion, depreciation and amortisation ("DD&A") charge
of US$14.9 million was higher than the US$12.0 million for the same
period in 2020 due to higher production and lower 2P reserves in
Morocco, partly offset by lower production at West Gharib.
-- The Company recognised a US$10.3 million non-cash E&E
impairment in H1 2021 following the decision to not commit to
further investment in the Lalla Mimouna Nord concession in Morocco
post the end of the concession date in July 2021. In H1 2020 US$4.5
million was written off 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$14.9 million, was 43% higher than the same period
in 2020, US$10.4 million, primarily due to the netback drivers
discussed above.
-- Capex of US$15.8 million, reflects:
o US$8.9 million (incl. US$0.5 million decommissioning
provisions) on three wells in Morocco;
o US$2.0 million for well workovers in Morocco;
o US$3.7 million for the completion of the SD-12X tie in at
South Disouq, well drilling preparations for IY-2X and HA-1X, the
SD-4X well workover, and other capex projects at South Disouq;
o US$1.2 million for workovers and development drilling
preparations in West Gharib;
-- Liquidity: Closing cash as at 30 June 2021 was US$9.1
million. The Company has satisfied the conditions precedent on the
five-year EBRD credit facility, which remains undrawn and has
US$10.0 million availability.
-- Together with cash generated from operations, the Company is
fully funded for all planned activities in 2021 - 2022.
COVID-19 update
-- The Company has had no COVID-19 business interruptions since
Q2 2020 when three customers in Morocco resumed taking gas
following a short period of mandatory shutdown. Egyptian production
has remained unaffected by COVID-19. The Company continues to
follow applicable government guidance in each of its
territories.
H1 2021 Performance vs 2021 Guidance
Production
-- H1 2021 entitlement production of 5,931 boe/d is 3% higher
than midpoint guidance of 5,770 boe/d and 4% lower than H1 2020. An
analysis of H1 2021 production by asset vs guidance is as
follows:
Gross production SDX entitlement production
(boe/d)
Asset Guidance - Actual - Guidance Actual - Actual -
12 months ended 6 months ended - 12 months 6 months 6 months
31 December 30 June 2021 ended 31 ended 30 ended 30
2021 December June 2021 June 2020
2021
------------------- ----------------- -------------- ----------- -----------
Core assets
------------------- ----------------- -------------- ----------- -----------
South Disouq
- WI 55% & 100% 44 - 46 MMscfe/d 45.2 MMscfe/d 4,300 - 4,500 4,422 4,825
------------------- ----------------- -------------- ----------- -----------
West Gharib - 2,350 - 2,650
WI 50% bbl/d 2,707 bbl/d 446 - 505 516 647
------------------- ----------------- -------------- ----------- -----------
Morocco - WI
75% 7.0 - 7.3 MMscf/d 7.9 MMscf/d 874 - 915 993 707
------------------- ----------------- -------------- ----------- -----------
Total 5,620 - 5,920 5,931 6,179
-------------- ----------- -----------
Discontinued
operations
------------------- ----------------- -------------- ----------- -----------
NW Gemsa - WI
50% N/A N/A N/A N/A 769
------------------- ----------------- -------------- ----------- -----------
South Ramadan
- WI 12.75% N/A N/A N/A N/A 32
------------------- ----------------- -------------- ----------- -----------
Total (incl.
disc. ops.) 5,620 - 5,920 5,931 6,980
-------------- ----------- -----------
o South Disouq : During the first half of 2021, the existing
wells continued to exhibit natural decline and expected sand and
water production from two of the five wells, albeit this was partly
offset by contribution from the SD-12X well which was brought
online in December 2020. The SD-1X and SD-4X wells were
successfully worked over during the period and were put back on
production at improved gas production rates and with reduced sand
and water production. Production for the six months was above
midpoint guidance, with production for the remainder of the year
expected to remain close to this as the impact of the planned 2-3%
Central Processing Facility ("CPF") downtime in H2 should broadly
be offset by contribution from the IY-2X well which is expected to
be tied in during the last week in August.
o West Gharib: The existing wellstock at the asset continued to
produce steadily, albeit exhibiting natural decline as expected.
Preparations are advanced for a development drilling campaign of
four wells plus one water injector well which will commence in Q4
and allow the Company to benefit from low-risk production growth
into a higher commodity price environment. Production will trend
towards midpoint guidance until such time as the new wells are
drilled and brought online.
o Morocco: H1 2021 saw stronger demand from all customers and
this is the reason that the Company is currently exceeding
guidance. In addition, H1 2021 reflects additional consumption from
an existing customer's second factory which came online in December
2020. Production guidance is 8-12% higher than 2020 production and
reflects a sustained return to normal levels of consumption across
the customer base, following COVID shutdowns which impacted 2020
production.
o COVID-19: The 2021 production guidance presented assumes no
significant production curtailments due to COVID-19. Should there
be COVID-19 related disruptions, then production guidance may be
revised.
Capex
-- Capex for the six months to 30 June 2021 is shown below and
is compared to the revised guidance figure of US$26.5-28.0 million
(previous guidance US$25.0-26.5 million) which predominantly
relates to one exploration and one development well in South Disouq
together with workovers and the installation of an inlet
compressor. Five new wells and workovers are planned in Morocco and
four new wells and facilities upgrades will be undertaken at West
Gharib.
Asset Guidance - 12 Actual - 6 months
months ended 31 ended 30 June
December 2021 2021
South Disouq - WI US$7.0 - 7.5 million US$3.7 million
55% & 100% (1)
--------------------- ------------------
West Gharib - WI US$2.5 - 3.0 million US$1.2 million
50%
--------------------- ------------------
Morocco - WI 75% US$17.0 - 17.5 US$10.9 million
million (2)
--------------------- ------------------
Total US$26.5 - 28.0 US$15.8 million
million
--------------------- ------------------
(1) Includes US$0.6 million of expenditure that was pre-paid as
a project milestone in 2020 but has now been reclassified to
capex
(2) Includes US$0.5 million of non-cash decommissioning
provisions
o South Disouq : The development well, Ibn Yunus-2X, spud in
late June 2021 and reached TD in July 2021 encountering 40.5 ft of
net gas sand pay. During the last week in August, the Company
expects that the IY-2X well will be tied in via a short flowline to
the Ibn Yunus-1X location where an existing flowline connects to
the South Disouq CPF. The gross cost of the tie-in was c.US$0.55
million. The Hanut-1X exploration well, which was completed during
Q3 2021, did not encounter gas-bearing sands and will be plugged
and abandoned. An inlet compressor will be installed at the CPF
site to maximise recovery from the fields, and several well
workovers are also planned. In H1 2021, US$3.7 million of capex was
invested for the compressor project (US$1.5 million), the IY-2X
development well (US$0.6 million), the completion of the SD-12X tie
in (US$0.4 million), planning for the HA-1X exploration well
(US$0.2 million), the workovers of SD-4X and SD-1X (US$0.2 million)
and other CPF projects.
o West Gharib: Four infill development wells and one water
injection well will be drilled, and additional facilities to
support this project will be installed. In H1 2021, US$1.2 million
of capex was spent on a number of well workovers and development
drilling preparations.
o Morocco: Capex guidance for Morocco for the 12 months ended 31
December 2021 has been increased by US$1.5 million as the wells
planned for the second phase of the 2021 campaign in H2 are deeper
than those included in the original guidance. In H1 2021, US$10.9
million of capex was spent on three development wells (US$8.9
million which includes US$0.5 million of decommissioning
provisions) and a well workover campaign (US$2.0 million). A
further two development wells will be drilled in the next campaign
in Q3/Q4 2021.
-- The actual and anticipated timings of planned key capex activities are outlined below:
Asset Activity 2021 Timing
South Disouq SD-4X workover Q1(1)
----------------------------- ------------
SD-1X workover Q2(1)
----------------------------- ------------
Compressor fabrication & Q2-Q3(2)
installation
----------------------------- ------------
Ibn Yunus-2X development Q2-Q3
well (incl. tie in)
----------------------------- ------------
Hanut-1X exploration well Q3(2)
----------------------------- ------------
SD-3X workover Q4
----------------------------- ------------
Morocco Well workovers Q1 (1)
& Q4
----------------------------- ------------
Drilling campaign- first Q2 (1)
three wells
----------------------------- ------------
Drilling campaign- remaining Q3-Q4
two wells
----------------------------- ------------
West Gharib Four development wells Q3-Q4
----------------------------- ------------
Water injection well and Q3-Q4
facilities upgrades
----------------------------- ------------
(1) Activity completed
(2) Completed post period end
2021 Drilling and Operations Update
Morocco drilling campaign update (SDX 75% working interest)
-- The first phase of the Morocco drilling campaign consisted of
three appraisal/development wells in SDX's operated Gharb Basin
acreage in Morocco (SDX: 75% working interest).
-- The first well, OYF-3, which spud on 30 April 2021, reached
its TD at 1,183 metres MD on 11 May 2021. The main Guebbas
reservoir target was thicker than expected and encountered a 5.2
metre net gas sand. The well also encountered a 1.7 metre net gas
sand in a secondary zone that OYF-3 will also produce from.
-- The second well, KSR-17, was spud on 13 May 2021 and reached
its TD at 1,848 metres MD on 27 May 2021. In the main Hoot
reservoir, the well encountered a 5.3 metre net gas sand which was
slightly thinner than expected, but with very good reservoir
properties.
-- Both OYF-3 and KSR-17 have been tested, connected, and
producing into our infrastructure before the end of the reporting
period. Post-drill P50 reserves are estimated at a combined gross
0.81bcf recoverable which is in line with predrill estimates.
-- Finally, the third well of the campaign, KSR-18, was spud on
30 May 2021 and reached its TD of 1,905 metres MD on 14 June 2021.
Both prognosed targets were successfully encountered, with the
shallower Mid Guebbas target comprising a 3.8 metre net gas sand
and the main Hoot target encountering a 13.9 metre net gas sand. As
expected, the main Hoot had been slightly depleted by production
from a nearby well, however the well is still expected to
contribute incremental volumes and deliverability from this
extensive compartment. Further to these zones, a third 5.5 metre
net gas sand was encountered at the Base Guebbas and will
contribute to production in the future when the Hoot has been
depleted. Subsequent to the reporting period, KSR-18 has been
tested and put on production.
-- The second phase of the Moroccan drilling campaign is
expected to commence in September/October 2021.
-- The above developments will allow the Company to continue to
supply gas to our customers in line with our contractual
commitments and continue to support lower CO(2) emissions at our
customers.
South Disouq Egypt exploration drilling campaign update (SDX
55%/100% working interest)
-- 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 drill-ready prospects.
-- The Company received final Ministerial and Parliamentary
approval of the two-year extension to the South Disouq exploration
area. The campaign kicked off with the drilling of the IY-2X
development well in the Ibn Yunus field to accelerate production
and cash flows. The well will be tied in during the last week in
August and the Company's expectations are that the IY-2X well can
maximise recovery from the Ibn Yunus Field and help maintain
current gross production levels of c.45MMscfe/d at the South Disouq
Central Processing Facility. The IY-2X well was tied in via a short
flowline to the Ibn Yunus-1X location where an existing flowline
connects to the South Disouq Central Processing Facility. The gross
cost of this tie-in was US$0.55 million.
-- Post-period end, the second well, the HA-1X exploration well,
spudded on 4 August and reached the target depth of 6,000ft on 17
August. The primary target for HA-1X was the Basal Kafr El Sheikh
sand at approximately 5,200ft. The well however found that the
Basal Kafr El Sheikh sand had been eroded at this location. Whilst
drilling to target depth, good quality sands were found at the
Qawasim level, however they were not charged with gas. SDX
considers the result of the HA-1X well to have limited impact on
the remaining c.90-100bcf of prospectivity in the SDX acreage at
South Disouq.
-- 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
Mohsen 55-100(1) KES extension Single Target 27 46
---------- --------- -------------------- --------------- --------- ------------
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 40
---------- --------- -------------------- --------------- --------- ------------
Total 95
---------- --------- -------------------- --------------- --------- ------------
(1) Working interest % dependent on Partner's decision to
participate in the extension. The Company's partner has confirmed
its participation in the Hanut-1X well.
(2) Two-year extension period commences on date of Parliamentary
approval
-- Following the IY-2X and HA-1X well results, during H2 2021
the Company will evaluate the current and future prospectivity of
the South Disouq concession to assess whether there is evidence
that the carrying value of the asset should be impaired.
West Gharib Egypt development drilling campaign update (SDX 50%
working interest)
-- In March 2021, SDX obtained approval for a ten-year extension
to the West Gharib Production Services Agreement increasing audited
working interest 2P reserves in this core oil asset as at 31
December 2020, by 60% year on year, or 119% taking account of 2020
production, to 3.52 million barrels.
-- Following this agreement, SDX and its partner commenced
planning for a four well development drilling campaign plus one
water injector well that is expected to start in Q4 2021, and is
part of a wider three-year plan to arrest production decline in the
asset and return production levels to c.3,000 bbl/d, taking
advantage of low-risk production growth and the improved oil
pricing environment.
Six months to 30 June 2021 Financial Update
-- Netback was US$22.1 million, 26% higher than the Netback of
US$17.6 million for the six months to 30 June 2020, driven by:
o Net revenue increase of US$5.2 million due to:
o US$1.2 million higher revenue at West Gharib as lower
production (2021: 516 bbl/d, 2020: 647 bbl/d) was more than offset
by higher realised service fees (2021: US$51.10/bbl, 2020:
US$30.18/bbl);
o US$4.4 million higher revenue in Morocco due to increased
production following strong demand rebound following COVID-19
shutdowns in early 2020 and an additional factory being supplied
(2021: 993 boe/d, 2020: 707 boe/d). Revenue was further boosted by
higher prices due to the strengthening of the Moroccan dirham and
the additional factory taking gas at a higher price than the
contractual average; offset by
o US$0.4 million lower South Disouq revenue due to lower
production (2021: 4,422 boe/d, 2020: 4,825 boe/d) as a result of
natural decline at several wells and downtime for workover
activity, partly offset by new production from the SD-12X well and
a higher realised price for condensate.
o Operating costs increased by US$0.7 million from the prior
period due to increased well management costs at South Disouq and a
greater number of wells producing in Morocco, partly offset by
lower costs at West Gharib due to cost savings and lower workover
activities.
-- EBITDAX was US$19.9 million, US$4.2 million (27%) higher than
EBITDAX of US$15.7 million for the six months to 30 June 2020, for
the reasons described in the netback section above.
-- The main components of SDX's comprehensive loss of US$10.1
million for the six months ended 30 June 2021 are:
o US$22.1 million Netback explained above;
o US$10.9 million of E&E expense which relates to the
US$10.3 million non-cash impairment of the Lalla Mimouna Nord
concession in Morocco and ongoing new venture activity
(predominantly internal management time);
o US$14.9 million of DD&A expense which reflects lower West
Gharib production offset by increased production in Morocco;
o US$2.3 million of ongoing G&A expense; and
o US$3.7 million of corporation tax predominantly for South
Disouq.
Operating cash flow (before capex, excluding discontinued
operations)
-- Operating cash flow (before capex, excluding discontinued
operations) of US$14.9 million, 43% higher than the same period in
2020 of US$10.4 million primarily due to the netback drivers
discussed above, as well as less cash spent on inventory.
H1 2021 ESG metrics
-- The Company's operated assets recorded a carbon intensity of
2.7kg CO(2) e/boe in H1 2021, which is one of the lowest rates in
the industry. This was higher than the 1.7 kg CO(2e) /boe reported
for the twelve months ended 31 December 2020 as the booster
compressor at South Disouq was online throughout H1 2021, but only
from Q2 2020, and in January 2021 a second production compressor
was commissioned in Morocco. Combined production from the two
assets was also marginally lower in H1 2021 compared to H1
2020.
-- Scope 1 greenhouse gas emissions at operated assets were
4,405 tons of CO(2) e. Scope 3 greenhouse gas emissions in Morocco
were 75,500 tons of CO(2) e, which is approximately 38,500 tons of
CO(2) e less than using alternative heavy fuel oil.
-- There was one Lost Time Injury recorded in Morocco in July
2021. A contractor sustained a minor injury in a road traffic
accident but after a short period of observation was able to return
to work.
-- No produced water was discharged into the environment in
Morocco (100% contained and evaporated) or at South Disouq (100%
recycled) during H1 2021.
-- There were no hydrocarbon spills at operated assets during H1 2021.
-- During the first half of 2021, the Company was delighted to
support two hospitals close to the South Disouq operation by
donating 13 monitors and BPAP ventilators to assist both in
alleviating the current COVID-19 crisis and equipping the teams
there for the longer-term health of our local communities. In
Morocco, the Company is working on several initiatives to be
launched later in 2021 as soon as this can be done safely.
-- The Company continues to adopt high standards of Governance
through its adherence to the QCA Code on Corporate Governance.
Outlook
-- Management believes that 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 2021
and beyond as approximately 85% of the Company's cash flows are
expected to be generated from fixed-price gas businesses.
-- Whilst acknowledging the volatility of the commodities
market, the current strong oil price and outlook means that the
Group also plans to capitalise on its recent production service
agreement extension at West Gharib by investing in a 12-well
development drilling programme over the next three years, including
four wells in 2021.
-- Anticipated 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 of its portfolio and
considers this the most appropriate use of the Company's capital.
This will be assessed on an ongoing basis.
KEY FINANCIAL & OPERATING HIGHLIGHTS
Three months ended Six months ended
Prior Quarter 30 June(3) 30 June
-------------------------- -------------- ------------------------------------ ------------------------------------
$000s except per unit
amounts 2021 (unaudited) 2020 (unaudited) 2021 (unaudited) 2020 (unaudited)
-------------------------- -------------- ----------------- ----------------- -----------------
FINANCIAL
-------------------------- -------------- ----------------- ----------------- -----------------
Net revenues 13,383 13,725 9,163 27,108 21,856
Operating costs (2,616) (2,363) (1,844) (4,979) (4,258)
Netback (1) 10,767 11,362 7,319 22,129 17,598
EBITDAX (1) 9,811 10,103 6,307 19,914 15,686
Total comprehensive
profit/(loss) 613 (10,699) (801) (10,086) (3,945)
Net profit/(loss) per
share
- basic $0.003 $(0.052) $(0.004) $(0.049) $(0.019)
Cash, end of period 9,734 9,108 9,275 9,108 9,275
Capital expenditures 3,964 11,875 3,842 15,839 19,375
Total assets 123,788 114,645 129,246 114,645 129,246
Shareholders' equity 97,079 86,430 94,390 86,430 94,390
Common shares outstanding
(000's) 205,378 205,378 204,723 205,378 204,723
OPERATIONAL
-------------------------- -------------- ----------------- ----------------- ----------------- -----------------
West Gharib production
service
fee (bbl/d) 543 490 628 516 647
South Disouq gas sales
(boe/d) 4,094 4,313 4,401 4,204 4,557
Morocco gas sales (boe/d) 1,023 964 551 993 707
Other products sales
(boe/d) 202 235 253 218 268
-------------------------- -------------- ----------------- ----------------- ----------------- -----------------
Total sales volumes
(boe/d)
(2) 5,682 6,002 5,833 5,931 6,179
-------------------------- -------------- ----------------- ----------------- -----------------
Realised West Gharib
service
fee (US$/bbl) $47.90 $54.61 $20.94 $51.10 $30.18
Realised South Disouq gas
price (US$/Mcf) $2.85 $2.83 $2.85 $2.85 $2.85
Realised Morocco gas
price
(US$/Mcf) $11.32 $11.49 $10.40 $11.40 $10.35
Royalties ($/boe) (2) $4.82 $5.02 $4.91 $4.93 $5.01
Operating costs ($/boe)
(2) $4.96 $4.33 $3.47 $4.64 $3.79
Netback ($/boe) (1) (2) $20.41 $20.81 $13.79 $20.61 $15.65
(1) Refer to the "Non-IFRS Measures" section of this release
below for details of Netback and EBITDAX.
(2) Excludes discontinued operations
(3) The Q2 2021 and Q2 2020 information in respect of the three
months ended 30 June 2021 and 30 June 2020 respectively included in
the Condensed Financial Statements has not been reviewed by
PricewaterhouseCoopers LLP (the Company's auditors).
Consolidated Balance Sheet (unaudited)
(US$'000s) As at 30 June 2021 As at 31 December
2020
---------------------- ----------------------------------------- ---------------------------------------
Assets
Cash and cash
equivalents 9,108 10,056
Trade and other
receivables 18,967 18,608
Inventory 7,643 8,414
-------------------------- ----------------------------------------- ---------------------------------------
Current assets 35,718 37,078
Investments 4,013 3,790
Property, plant and
equipment 56,375 57,880
Exploration and
evaluation
assets 16,873 24,455
Right-of-use assets 1,666 1,400
----------------------- ---------------------------------------
Non-current assets 78,927 87,525
Total assets 114,645 124,603
-------------------------- ---------------------------------------
Liabilities
Trade and other payables 18,230 20,120
Decommissioning
liability - 327
Current income taxes 1,187 241
Lease liability 501 461
----------------------- ----------------------------------------- ---------------------------------------
Current liabilities 19,918 21,149
Decommissioning
liability 6,822 5,862
Deferred income taxes 290 290
Lease liability 1,185 960
----------------------- ---------------------------------------
Non-current liabilities 8,297 7,112
Total liabilities 28,215 28,261
----------------------- ---------------------------------------
Equity
Share capital 2,601 2,601
Share premium 130 130
Share-based payment
reserve 7,443 7,269
Accumulated other
comprehensive
loss (917) (917)
Merger reserve 37,034 37,034
Retained earnings 40,139 50,225
Total equity 86,430 96,342
-------------------------- ---------------------------------------
Equity and liabilities 114,645 124,603
----------------------- ---------------------------------------
Consolidated Statement of Comprehensive Income (unaudited)
Unreviewed (1)
Three months ended Six months ended
30 June 30 June
(US$'000s) 2021 2020 2021 2020
-------------------- ------------------- ----------------- ------------------- ----------------
Revenue, net of
royalties 13,725 9,163 27,108 21,856
Direct operating
expense (2,363) (1,844) (4,979) (4,258)
Gross profit 11,362 7,319 22,129 17,598
Exploration and
evaluation expense (10,612) (303) (10,880) (5,099)
Depletion, depreciation
and amortisation (7,521) (5,225) (14,945) (11,973)
Share-based
compensation (50) (68) (174) (313)
Share of profit from
joint venture 108 137 223 384
General and
administrative expenses
- Ongoing general and
administrative
expenses (1,317) (1,013) (2,264) (1,915)
- Transaction costs - (68) - (68)
---------------------- ------------------- ----------------- ------------------- ----------------
Operating
(loss)/income (8,030) 779 (5,911) (1,386)
Finance costs (153) (134) (334) (276)
Foreign exchange
(loss)/gain (70) 30 (162) (301)
(Loss)/income before
income taxes (8,253) 675 (6,407) (1,963)
Current income tax
expense (2,446) (1,085) (3,679) (2,728)
(Loss)/profit from
discontinued
operations - (391) - 737
Loss and total
comprehensive loss
for the period (10,699) (801) (10,086) (3,954)
------------------------ ----------------- ------------------- ----------------
Net loss per
share
Basic $(0.052) $(0.004) $(0.049) $(0.019)
Diluted $(0.052) $(0.004) $(0.049) $(0.019)
-------------------- ----------------- ------------------- ----------------
(1) The Q2 2021 and Q2 2020 information in respect of the three
months ended 30 June 2021 and 30 June 2020 respectively included in
the Condensed Financial Statements has not been reviewed by
PricewaterhouseCoopers LLP (The Company's auditors).
Consolidated Statement of Changes in Equity (unaudited)
Six months ended 30 June
(US$'000s) 2021 2020
-------------------------------- --------------------------------- ---------------------------------
Share capital
Balance, beginning of
period 2,601 2,593
Balance, end
of period 2,601 2,593
Share premium
Balance, beginning of 130 -
period
Balance, end 130 -
of period
Share-based payment
reserve
Balance, beginning of
period 7,269 7,038
Share-based compensation for
the period 174 313
----------------------------------- --------------------------------- ---------------------------------
Balance, end
of period 7,443 7,351
Accumulated other comprehensive
loss
Balance, beginning of
period (917) (917)
Balance, end
of period (917) (917)
Merger reserve
Balance, beginning of
period 37,034 37,034
Balance, end
of period 37,034 37,034
Retained earnings
Balance, beginning of
period 50,225 52,283
Total comprehensive
loss (10,086) (3,954)
---------------------------------- --------------------------------- ---------------------------------
Balance, end
of period 40,139 48,329
Total equity 86,430 94,390
--------------------------------- ---------------------------------
Consolidated Statement of Cash
Flows (unaudited)
Unreviewed (1) Six months ended
Three months ended 30 June
30 June
(US$'000s) 2021 2020 2021 2020
------------------------------------------- -------- --------------- ------------------ ---------
Cash flows generated from/(used
in) operating activities
(Loss)/income before income taxes (8,253) 675 (6,407) (1,963)
Adjustments for:
Depletion, depreciation and amortisation 7,521 5,225 14,945 11,973
Exploration and evaluation expense 10,313 - 10,313 4,527
Finance expense 153 134 334 276
Share-based compensation charge 50 68 174 313
Foreign exchange loss/(gain) (137) 173 (74) 457
Tax paid by state (1,338) (1,240) (2,566) (2,678)
Share of profit from joint venture (108) (137) (223) (384)
------------------------------------------- -------- --------------- ------------------ ---------
Operating cash flow before working
capital movements 8,201 4,898 16,496 12,521
Decrease/(increase) in trade and
other receivables 1,603 2,739 (273) 892
(Decrease)/increase in trade and
other payables (1,057) (763) (763) (498)
Decrease/(increase) of inventory 73 (361) (512) (1,422)
Cash generated from operating activities 8,820 6,513 14,948 11,493
Income taxes paid - (1,062) - (1,135)
------------------------------------------- ------------------ ---------
Net cash generated from operating
activities 8,820 5,451 14,948 10,358
Cash generated from discontinued
operations - 2,970 - 4,140
Cash flows generated from/(used
in) investing activities:
Property, plant and equipment expenditures (7,409) (139) (10,094) (5,625)
Exploration and evaluation expenditures (1,907) (8,466) (5,282) (11,593)
Advance proceeds from NW Gemsa
sale - 1,000 - 1,000
Dividends received - - - 774
Net cash used in investing activities (9,316) (7,605) (15,376) (15,444)
Cash flows generated from/(used
in) financing activities:
Payments of lease liabilities (229) (150) (503) (308)
Finance costs paid (40) (26) (95) (70)
------------------------------------------- -------- --------------- ------------------ ---------
Net cash used in financing activities (269) (176) (598) (378)
(Decrease)/increase in cash and
cash equivalents (765) 640 (1,026) (1,324)
Effect of foreign exchange on cash
and cash equivalents 139 (172) 78 (455)
Cash and cash equivalents, beginning
of period 9,734 8,807 10,056 11,054
------------------------------------------- -------- --------------- ------------------ ---------
Cash and cash equivalents, end
of period 9,108 9,275 9,108 9,275
------------------------------------------- --------------- ------------------ ---------
(1) The Q2 2021 and Q2 2020 information in respect of the three
months ended 30 June 2021 and 30 June 2020 respectively included in
the Condensed Financial Statements has not been reviewed by
PricewaterhouseCoopers LLP (The Company's auditors).
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
and Ibn Yunus gas fields and a 100% operated interest in the Ibn
Yunus North gas field, all 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.sdxenergygroup.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)
Callum Stewart
Jason Grossman
Ashton Clanfield
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
Glossary
"bbl" stock tank barrel
"bbl/d" barrels of oil per day
---------------------------------------
"bcf" billion cubic feet
---------------------------------------
"boe/d" barrels of oil equivalent per
day
---------------------------------------
"CO(2) e/boe" carbon dioxide equivalent per
barrels of oil equivalent
---------------------------------------
"Mcf" thousands of cubic feet
---------------------------------------
"MD" measured depth
---------------------------------------
"MMscf/d" million standard cubic feet
per day
---------------------------------------
"MMscfe/d" million standard cubic feet
equivalent per day
---------------------------------------
"P50" means that there is at least
a 50% probability that the quantities
actually recovered will equal
or exceed the best estimate.
---------------------------------------
"TD" total depth
---------------------------------------
"2P Reserves" 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 2021 production and capex guidance, liquidity and
sources of cash flows in 2021, the impact of COVID-19 on customer
consumption, and future drilling developments and results 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 2020, which can be found on
the Company's website at https://www.sdxenergygroup.com/ and 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.
Reserve and Resource Data
The reserve and resource 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 reserves
and resources disclosed herein have an effective date of 31
December 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.
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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END
IR SFSFWUEFSEIA
(END) Dow Jones Newswires
August 20, 2021 02:00 ET (06:00 GMT)
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