2022 AGM TRADING AND OPERATIONS UPDATE

RNS Number : 7257O

SDX Energy PLC

14 June 2022

 

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 AS IT FORMS PART OF UK LAW BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018 ("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.

14 June 2022

SDX ENERGY PLC ("SDX", the "Company" or the "Group")

2022 AGM TRADING AND OPERATIONS UPDATE

SDX Energy Plc (AIM: SDX), the MENA-focused energy company, issues the following trading and operations update in advance of the Company's AGM today at 10.00 am BST. The information contained herein has not been audited and may be subject to further review and amendment. 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 a strong operational and financial performance update ahead of this year's AGM.  Our drilling results in South Disouq and West Gharib over the past five months have been excellent with six successful wells and with operations ongoing on another well at West Gharib.  A one hundred percent success rate to date. Our drilling success in South Disouq in particular has enabled us to identify further material prospectivity in and around our leases.  Production continues to be above guidance and we have further grown our cash balance to US$15.2 million as at 31 May 2022."

Year to date 2022 Operations Highlights

· Average entitlement production as at 31 May 2022 of 3,778 boe/d was 10% higher than mid-point 2022 market guidance of 3,425 boe/d.

· Production in Morocco and at South Disouq was above 2022 guidance, with West Gharib below due to mechanical issues with a previous rig that is now being replaced. West Gharib production is expected to increase in the second half of the year.

·   In South Disouq, the planned three-well campaign has been successfully completed with three discoveries being made. SD-5X has been brought online ahead of schedule and is now contributing to production and cash flow. SD-12 East is undergoing a pressure build up test with MA-1X testing expected to commence in the coming days.

· Condensate production from SD-5X is also better than expected at gross 100-110 bbld/d compared to pre-drill expectations of 25-30 bbl/d.

· Based upon the results of the recent South Disouq drilling campaign, Management has reassessed the remaining prospectivity in South Disouq and has identified gross unrisked P50 prospectivity of 145 bcf of which c100bcf is in acreage that requires re-award by the Egyptian state.

· In West Gharib three wells have been successfully completed with production already commenced from the MSD-21 and MSD-25 wells. The recently completed MSD-24 well is expected to commence production in the next four weeks and operations are continuing at the MSD-20 well.

· In Morocco, preparations continue for the recommencement of the drilling campaign that was suspended in December 2021. The first of up to seven wells to be drilled in the next year is expected to spud in July 2022

·   In February 2022, the Company announced the disposal of 33% of the shares in the entity that holds its interests across its South Disouq concession for US$5.5 million which has been fully received.

Year to date 2022 Financial Highlights

· Closing cash as at 31 May 2022 was US$15.2 million

· Capex as at 31 May 2022 of US$8.3 million, reflects:

o  US$5.2 million for the three-well drilling campaign at South Disouq split between: US$1.8 million for the drilling and completion of the SD-5X well, US$2.2 million for the drilling and completion of the SD-12 East well and US$1.2 million for the drilling of the MA-1X well.

o  US$1.2 million of pre-drilling and standby costs associated with the re-commencement of the Moroccan drilling campaign, US$0.3 million on the SAH-4 workover as well as US$0.3 million of infrastructure works; and

o  US$1.3 million of West Gharib drilling costs across the MSD-20, MSD-21, MSD-24, and MSD-25 wells.

First disbursement of EBRD credit facility

The Company has submitted a disbursement application for the first draw down of its credit facility with the European Bank of Reconstruction and Development ("EBRD") for an amount of US$2.5 million reimbursing some of the Moroccan capex that was originally funded from the Company's cash resources.  One of the drivers for the proposed draw down is that global macroeconomic circumstances in recent months have made it more challenging to repatriate cash from the Company's Egyptian operations, and at present, restrictions have been placed on outgoing US dollar transfers by the Central Bank of Egypt. The interest rate at this level of draw down on the credit facility is LIBOR plus 4%. As at 31 May 2022, the Group's reported cash balance was US$15.2 million and all ongoing and planned operations in Morocco and Egypt remain fully-funded from in-country cash flows and existing cash balances.

Following the initial draw down, the Company expects to have an additional US$3.2 million of available liquidity under the EBRD facility as per the last redetermination completed as at end of April 2022.

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 36.9% operated interest in the South Disouq and Ibn Yunus gas fields and a 67.0% operated interest in the Ibn Yunus North 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 four 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 . 

Standard

Estimates of reserves and resources have been prepared in accordance with the June 2018 Society of Petroleum Engineers ("SPE") Petroleum Resources Management System ("PRMS") as the standard for classification and reporting with an effective date of 31 December 2021 and the SPE's Canadian Oil and Gas Evaluation Handbook and in accordance with NI 51-101.

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 Dr Rob Cook, VP Subsurface of SDX. Dr. Cook has 30 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: [phone]
Stifel Nicolaus Europe Limited (Nominated Adviser and Broker) Callum Stewart Jason Grossman Ashton Clanfield Tel: [phone]
Camarco (PR) Billy Clegg/Owen Roberts/Violet Wilson Tel: [phone]

Glossary

"bcf"	Billions of standard cubic feet
"bbl/d"	Barrels per day
"b oe/d "	Barrels of oil equivalent per day
"P50"	50 percent probability that the quantities actually recovered will equal or exceed the best estimate

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 future drilling developments and results, should 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 2021, 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.

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 2022. 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.

 

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