PRODUCTION AND CAPEX GUIDANCE FOR 2021
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.
26 January 2021
SDX ENERGY PLC ("SDX" or the "Company")
PROVIDES PRODUCTION AND CAPEX GUIDANCE FOR 2021
SDX Energy Plc (AIM: SDX), the MENA-focused oil and gas company sets out production and capex guidance for 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 pleased to provide our production and capex guidance for 2021, where after a very solid year of production in 2020, we continue on a similar profile, albeit with some contingency worked in for maintenance in Egypt. Partially offsetting this, I am very pleased to report that Moroccan production has returned to the levels seen before last year's COVID-19 close down. This year's expected operating cashflows, together with our existing cash of approximately US$10 million, will provide ample liquidity to carry out a busy drilling campaign of nine to eleven wells targeting exploration and development opportunities in Egypt and Morocco, including the potentially transformational gross 139bcf Hanut-1X well in South Disouq in Egypt and the testing of our newly discovered Top Nappe play in Morocco. Furthermore, we expect that our EBRD credit facility will soon return to US$10 million of availability and thus provide us with additional liquidity if required."
2021 Production Guidance
· 2021 production guidance of 5,620 - 5,920 boe/d is 1-6% lower than 2020 production, excluding the assets divested in 2020 due to expected production downtime from the planned Central Processing Facility ('CPF') maintenance deferred from 2020, together with compression installation and well workovers. This is partially offset by the incremental contribution of 100% of the working interest production from the recently connected SD-12X well. At West Gharib, development drilling is expected to slow natural decline and in Morocco production volumes are expected to increase as recovery from the 2020 COVID-19 close downs continues.
· An analysis of 2021 production guidance by asset is as follows:
|
Gross production |
SDX entitlement production boe/d |
SDX entitlement production boe/d |
||
|
Asset |
Guidance - 12 months ended 31 December 2021 |
Actual - 12 months ended 31 December 20201 |
Guidance 12 months ended 31 December 2021 |
Actual 12 months ended 31 December 20201 |
|
South Disouq - WI 55% & 100% SD-12X |
44 - 46 MMscfe/d |
49.5 MMscfe/d |
4,300 - 4,500 |
4,548 |
|
West Gharib - WI 50% |
2,350 - 2,650 bbl/d |
3,285 bbl/d |
446- 505 |
626 |
|
Morocco - WI 75% |
7.0 - 7.3 MMscf/d |
6.5 MMscf/d |
874 - 915 |
813 |
|
Total |
|
|
5,620 - 5,920 |
5,987 |
1 - 2020 actual production subject to final invoicing
o South Disouq : Production guidance for 2021 reflects planned 2-3% CPF downtime due to planned maintenance, the installation of an inlet compressor and several well workovers, none of which occurred in 2020. Where possible, these activities will be synchronised to minimise their impact. The Company's share of gross production will increase due to its 100% working interest in the SD-12X well, which started up ahead of schedule in December 2020.
o West Gharib: Production is expected to decline naturally during H1'21 until the planned three to four well campaign commences. Thereafter, the production decline is expected to be arrested, with further development wells planned for 2022 and 2023 with a view to growing production to approximately 3,000 bbl/d.
o Morocco: 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, together with a full year's contribution from an existing customer's second factory, which came online in December 2020.
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.
2021 Capex Guidance
· 2021 capex guidance range of US$25.0 - 26.5 million predominantly relates to one exploration and one development well in South Disouq together with workovers and the installation of an inlet compressor. Up to five new wells and workovers are planned in Morocco and up to four new wells and facilities upgrades at West Gharib.
|
Asset |
Guidance - 12 months ended 31 December 2021 |
Actual - 12 months ended 31 December 2020 (unaudited) |
|
South Disouq - WI 55% |
US$7.0 - 7.5 million |
US$10.9 million(1) |
|
West Gharib - WI 50% |
US$2.5 - 3.0 million |
US$0.5 million |
|
Morocco - WI 75% |
US$15.5 - 16.0 million |
US$14.1 million(2) |
|
Total |
US$25.0 - 26.5 million |
US$25.5 million |
(1) Includes US$0.2 million of non-cash decommissioning provisions
(2) Includes US$0.5 million of non-cash decommissioning provisions
· The anticipated timings of key capex activities are outlined below:
|
Asset |
Activity |
2021 Timing |
|
South Disouq |
SD-4X workover |
Q1 |
|
SD-1X workover |
Q2 |
|
|
Compressor fabrication & installation |
Q2-Q3 |
|
|
Ibn Yunus-2X development well (incl. tie in) |
Q2-Q3 |
|
|
Hanut-1X exploration well |
Q3 |
|
|
SD-3X workover |
Q4 |
|
|
Morocco |
Well workovers |
Q1 & Q4 |
|
Drilling campaign- first two wells |
Q2 |
|
|
LMS-2 well test |
Q3 |
|
|
Drilling campaign- remaining wells |
Q3-Q4 |
|
|
West Gharib |
Three/four development wells |
Q2-Q3 |
|
Water injection well and facilities upgrades |
Q2-Q3 |
o South Disouq : One development well, Ibn Yunus-2X, and one exploration well, Hanut-1X, will be drilled consecutively, commencing in Q2 2021. The IY-2X well will access the western compartment of the Ibn Yunus field and is expected to be completed and tied back rapidly once drilled. The Hanut-1X well is targeting unrisked mean recoverable volumes of 139bcf with a 33% chance of success. The Company's partner has confirmed that it will participate in both wells. An inlet compressor will be installed at the CPF site to maximise recovery from the fields, and several well workovers are also planned. Once the exploration concession extension that includes the Hanut and Mohsen prospects has been ratified by Parliament, the Company will pay its share of signature and training bonuses.
o West Gharib: At least three infill development wells will be drilled with a fourth contingent upon field performance and the macroeconomic environment. One water injection well will be drilled, and additional facilities to support this project will be installed. Given the recent low oil price environment, only one development well was drilled in 2020.
o Morocco: Four or five wells will be drilled in two campaigns in Q2 and Q4 2021. As the drilling rig is stacked in the Company's yard in Morocco, there will be no significant mobilisation cost and in addition splitting the campaign into two allocates the capital investment over approximately eight months which allows the cost of these wells to be comfortably covered by cash generated in that period. Four wells will target shallow biogenic gas that can be tied into the Company's infrastructure quickly and at low cost. Furthermore, one of these wells will be deepened to test the Top Nappe prospectivity in the Company's core production area. If the first Top Nappe test is successful, then a second well may also be deepened. On the assumption that the rig continues to be available after the drilling of the four firm wells, a fifth contingent well would target an additional prospect in the BMK area, which was derisked by the BMK-1 well in 2020. A workover programme of up to nine wells will also be conducted, including re-perforation and sliding sleeve operations to exploit behind-pipe reserves and maximise production and recovery from the existing well stock.
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, COGE and National Instrument 51-101, 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:
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SDX Energy Plc Mark Reid Chief Executive Officer Tel: +44 203 219 5640
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Stifel Nicolaus Europe Limited (Nominated Adviser and Joint Broker) Jason Grossman Ashton Clanfield Fred Walsh Tel: +44 (0) 20 7710 7600
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Peel Hunt LLP (Joint Broker) Richard Crichton David McKeown Tel: +44 (0) 207 418 8900 |
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Camarco (PR) Billy Clegg/Owen Roberts/Violet Wilson Tel: +44 (0) 203 757 4980
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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 |
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 production and capex guidance, future drilling plans in 2021, 2022 and 2023, the re-establishment of US$10 million of availability in the EBRD credit facility and the impact of COVID-19 on customer consumption, 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.
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.
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