RESULTS FOR THE 3 AND 6 MONTHS ENDED 30 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.
18 August 2022
SDX ENERGY PLC ("SDX", the "Company" or the "Group")
ANNOUNCES ITS FINANCIAL AND OPERATING RESULTS FOR THE THREE AND SIX MONTHS ENDED 30 JUNE 2022
SDX Energy Plc (AIM: SDX), the EMEA-focused oil and gas company, is pleased to announce its unaudited financial and operating results for the three and six months ended 30 June 2022. All monetary values are expressed in United States dollars net to the Company unless otherwise stated.
H1 2022 Key Highlights:
· Production of 3,724 boe/d, 2% higher than mid-point of recently increased full year guidance of 3,480 - 3,795 boe/d
· Out of nine wells drilled across SDX's portfolio in the year to date, six are now producing, one, MSD-27 has now completed drilling and another, MSD-20, is drilling ahead. These two wells should add a further gross 400 to 500 bbl/d to our West Gharib production in the next four to six weeks. The final well, MA-1X, is undergoing testing and analysis.
· EBITDAX of US$15.3 million and operating cash flow (before capex) of US$10.4 million
· Capex US$12.2 million compared to full year guidance of US$25.5 - 27.0 million .
· Net Cash position of US$12.8 million (unaudited) as at 30 June 2022
· Carbon intensity of 3.8kg CO2e/boe in H1 2022, one of the lowest rates in the industry
· Aleph Commodities Limited introduced as new cornerstone shareholder. Assisting with strategic review, expansion and financing plans with a focus on increased production, reserves and shareholder returns
Mark Reid, CEO of SDX, commented:
"The results for the last quarter have been both positive and encouraging with our production from Morocco and South Disouq ahead of our guidance and the drilling success seen at South Disouq earlier in the year already contributing to cashflows. Whilst mechanical issues with a rig at West Gharib mean that production is slightly lower than forecast, our success with the remainder of the wells, including as announced today, MSD-27, means that we are now achieving gross production of approximately 2,400-2,500 bbl/d from this concession, and we are set to continue to add valuable barrels to our production mix as the year progresses.
We believe that continued strong operational performance from the Company has been overshadowed to some degree by corporate news in the past quarter, with the proposed combination with Tenaz Energy ultimately not progressing and the introduction onto the Company's register of a new group of shareholders led by Aleph Commodities Limited. We are very pleased to welcome the Aleph shareholders as long-term investors who are aligned with Management's strategy of growth and increasing returns for all SDX stakeholders. We look forward to updating the market further as we work with our shareholders to map out what will be an exciting future for the Group."
Three and six months to 30 June 2022 Operations Highlights
· H1 2022 entitlement production of 3,724 boe/d was 2% higher than recently increased 2022 mid point guidance of 3,638 boe/d, driven by strong performances in Morocco and at South Disouq, with West Gharib's production lower than expected due to the mechanical issues with a previous rig that has now been replaced. West Gharib production is expected to increase in the second half of the year.
· The Company's operated assets recorded a carbon intensity of 3.8kg CO2e/boe in H1 2022 which is one of the lowest rates in the industry.
· In South Disouq, the planned three-well drilling campaign has been successfully completed. The SD-5X and SD-12_East discoveries have been brought online ahead of schedule and are now contributing to production and cash flow. The MA-1X gas discovery well is in the process of being evaluated to determine a commercialisation strategy.
· In West Gharib the MSD-21, -25, -24 and -23 wells have been successfully completed and are on production. Today, the Company is pleased to announce the completion of drilling at the MSD-27 infill development well . The well encountered 137.3 feet of good-quality, net oil pay sandstone, with an average porosity of 22.8% in the Asl Formation reservoir. MSD-27 will now be tied-in to the existing facilities and flow tested. Operations at MSD-20, which had been temporarily halted due to the replacement of a rig, have now recommenced and, assuming trouble free operations, the well should reach its target horizon by mid-September.The development drilling campaign is aimed at growing production to c.3,500 - 4,000 bbl/d by mid 2023
· In Morocco, the SAK-1 exploration well was spud on 6 August 2022 and is targeting the Guebbas Formation reservoir at around 1,108m MD (1,095m TVDSS). The well will also fulfil the remaining commitment on the Lalla Mimouna Sud Concession. SAK-1 is the first of a fully-funded, two-well drilling campaign on the SDX Gharb Basin acreage which is expected to take place during Q3 2022 with three further wells being considered for Q4'2022.
Three and six months to 30 June 2022 Corporate Highlights
· On 25 May 2022, it was announced that the boards of directors of Tenaz Energy Corp. ("Tenaz") and SDX had reached agreement on the terms of a recommended share-for-share combination pursuant to which Tenaz would acquire the entire issued ordinary share capital of SDX (the "Combination") which was proposed to be effected by means of a Scheme of Arrangement under Part 26 of the Companies Act 2006 (the "Scheme"). On 30 June 2022, Tenaz announced the introduction of a cash alternative that was made available under the terms of the Combination, through which shareholders of SDX could elect to receive cash instead of some or all of the share consideration to which they would otherwise be entitled to under the terms of the Combination. On 29 July 2022, SDX convened the Court Meeting and General Meeting in connection with the Combination. The total votes in favour of the resolutions were 48.30% at the Court Meeting and 54.27% at the General Meeting, which were below the minimum threshold (75% of those shares voted) needed to approve the resolutions. Accordingly, certain of the conditions of the Scheme were not satisfied and, consequently, the Combination has been terminated and the Scheme has lapsed.
· During July 2022, a group of shareholders led by Aleph Commodities Limited ("Aleph"), acquired 25.65% of the issued share capital of the Company and in doing so purchased 18.72% of the Company previously owned by Waha Capital PSJC. Aleph confirmed that it is assisting the Company with a strategic review and expansion plans with a focus on increasing production, reserves and shareholder returns.
· Aleph Commodities Limited is a global trading and investment company, founded in 2018 by former executives of Deutsche Bank, Goldman Sachs, JP Morgan, Engelhart Commodities Trading Partners, and Credit Suisse, supported by several large US and European family offices who are also shareholders of Aleph.
Three and six months to 30 June 2022 Financial Highlights
|
|
Three months ended 30 June |
Six months ended 30 June |
||
|
US$ million, except per unit amounts |
2022 |
2021 |
2022 |
2021 |
|
Net revenues(1) |
11.1 |
13.7 |
22.3 |
27.1 |
|
Netback(1)(3) |
8.8 |
11.4 |
17.9 |
22.1 |
|
Net realised average oil service fees - US$/barrel |
88.67 |
54.61 |
83.45 |
51.10 |
|
Net realised average Morocco gas price - US$/Mcf |
10.60 |
11.49 |
10.86 |
11.40 |
|
Net realised South Disouq gas price - US$/Mcf(2) |
2.85 |
2.83 |
2.85 |
2.85 |
|
Netback - US$/boe |
20.82 |
20.81 |
20.97 |
20.61 |
|
EBITDAX(1)(3) |
7.1 |
10.1 |
15.3 |
19.9 |
|
Exploration & evaluation expense ("E&E") |
(0.3) |
(10.6) |
(0.5) |
(10.9) |
|
Depletion, depreciation, and amortisation ("DD&A") |
(5.1) |
(7.5) |
(10.4) |
(14.9) |
|
Total comprehensive loss(4) |
(0.6) |
(10.7) |
(1.2) |
(10.1) |
|
Capital expenditure |
8.9 |
11.9 |
12.2 |
15.8 |
|
Net cash generated from operating activities |
3.8 |
8.8 |
10.4 |
14.9 |
|
Net cash and cash equivalents |
12.8 |
9.1 |
12.8 |
9.1 |
(1) Net revenues, Netback and EBITDAX for six months ended 30 June 2022 and 2021 includes US$2.3 million and US$2.6 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$1.1 million and US$1.3 million for the three months ended 30 June 2022 and 2021).
(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) Refer to the "Non-IFRS Measures" section of this release below for details of Netback and EBITDAX.
(4) For the three and six months ended 30 June 2022 total comprehensive loss is stated before minority interest. Total comprehensive loss attributable to SDX shareholders for the three and six months ended 30 June 2022 is US$0.6 million and US$0.8 million, respectively.
· H1 2022 Netback was US$17.9 million, 19% lower than the same period in 2021. Netback contribution from South Disouq was US$7.4 million (H1 2021: US$7.8 million) due to lower gas and condensate production owing to natural decline being partly offset by higher realised price for condensate and lower opex. West Gharib Netback increased by US$1.0 million compared to the same period in 2021 due to the increase in the realised oil service fee, partly offset by lower production. Morocco Netback was lower in H1 2022 by US$4.8 million compared to the same period in 2021 due to lower production following the Company's decision not to immediately renew a customer contract, as well as slightly lower realised pricing due to the weakening of the Moroccan Dirham against the US Dollar.
· H1 2022 EBITDAX of US$15.3 million was 23% lower than the same period in 2021 of US$19.9 million due to lower Netback, as described above.
· H1 2022 the depletion, depreciation and amortisation ("DD&A") charge of US$10.4 million was lower than the US$14.9 million for the same period in 2021 due to lower production in Morocco and a lower depreciable asset base in South Disouq following the impairment recognised at year-end 2021.
· H1 2022 operating cash flow (before capex) of US$10.4 million, was lower than the same period in 2021 of US$14.9 million, primarily due to prepayments made in June 2022 and income taxes paid during Q2 2022.
· Capex of US$12.2 million, reflects:
o US$7.4 million for the three-well drilling campaign at South Disouq split between: US$2.0 million for the drilling, completion, testing and tie in of the SD-5X well, US$3.0 million for the drilling, completion and tie in of the SD-12_East well and US$2.4 million for the drilling, completion and testing of the MA-1X well. In addition, US$0.3 million has been spent on a workover of SD-3X to replace the production tubing;
o US$2.4 million of pre-drilling and preparation costs associated with the re-commencement of the Moroccan drilling campaign, US$0.3 million on the SAH-4 well recompletion and US$0.3 million of infrastructure works; and
o US$1.5 million of West Gharib drilling costs across the MSD-20, -21, -23, -24, and -25 wells
· Liquidity: The Company's net cash position as at 30 June 2022 was US$12.8 million, with cash balances of US$15.3 million offset by US$2.5 million drawn debt from the EBRD facility. As a result of various geopolitical factors, US dollar transfers by the Central Bank of Egypt have been delayed resulting in the need to draw the EBRD facility to pay head office G&A and certain US$ dominated operational expenses. Under the existing facility with the EBRD, US$3.2 million of additional undrawn lines remain available to the Company.
· Together with cash generated from operations, management believes the Company is fully funded for all its stated objectives in 2022.
H1 2022 Performance vs 2022 Guidance
Production
· Average entitlement production as at 30 June 2022 of 3,724 boe/d, which was 2% higher than mid-point 2022 market guidance of 3,638 boe/d.
|
Gross production |
SDX entitlement production (boe/d) |
||||
|
Asset |
Guidance - 12 months ended 31 December 2022
|
Actual - 6 months ended 30 June 2022
|
Guidance - 12 months ended 31 December 2022 |
Actual - 6 months ended 30 June 2022 |
Actual - 6 months ended 30 June 2021 |
|
Core assets |
|
|
|
|
|
|
South Disouq - WI 36.9% & 67.0%(1) |
38 - 40 MMscfe/d |
38.7 MMscfe/d |
2,500 - 2,700(2) |
2,710 |
4,422(3) |
|
West Gharib - WI 50% |
2,000 - 2,450 bbl/d |
1,976 bbl/d |
380 - 470 |
376 |
516 |
|
Morocco - WI 75% |
4.8 - 5.0 MMscf/d |
5.1 MMscf/d |
600 - 625 |
638 |
993 |
|
Total |
|
|
3,480 - 3,795 |
3,724 |
5,931 |
(1) After completion of the South Disouq disposal with effect from 1 February 2022.
(2) Net of minority interest. Gross of minority interest, production guidance is expected to be 3,500 - 3,700 boe/d.
(3) 30 June 2021 South Disouq entitlement production is shown at pre-disposal working interest of 55%/100%.
o South Disouq : During the first half of 2022, the existing wells continued to exhibit natural decline and expected sand and water production, albeit this was partly offset by contribution from the three wells (IY-2X, SD-5X and SD-12_East) that came into production after 30 June 2021. Production guidance for 2022 reflects the disposal of 33% of SDX's interest in the asset, 2-3% CPF and compressor downtime due to planned maintenance, the successful drilling of SD-12_East, several well workovers and was recently updated for the successful drilling of SD-5X. The MA-1X gas discovery well is in the process of being evaluated to determine a commercialisation strategy.
o West Gharib: The existing wellstock at the asset continued to produce steadily, albeit exhibiting natural decline as expected, partly offset by contribution from the recently-drilled three wells (MSD-21, MSD-24 and MSD-25) and successful well workovers. The development drilling campaign will arrest the asset's natural decline, with new wells beginning to grow production during the second half of the year and into 2023.
o Morocco: H1 2022 saw strong demand from the customer portfolio in Morocco, which is the reason that the Company is currently exceeding guidance. 2022 production guidance is lower than 2021 production as the Company decided not to immediately renew a five-year customer contract that expired on 31 December 2021 until the Company has better visibility on future gas supply and pricing to support the full term of a new contract. The Company is exploring several options for re-entering into discussions with this customer.
Capex
· 2022 capex guidance range of US$25.5-27.0 million is fully funded and predominantly relates to one appraisal and two exploration wells in South Disouq, up to eight new wells and facilities upgrades in West Gharib, and up to five new wells in Morocco.
|
Asset |
Guidance - 12 months ended 31 December 2022 |
Actual - 6 months ended 30 June 2022 |
|
South Disouq - WI 36.9% & 67.0%(1) |
US$9.0 - 9.5 million(2) |
US$7.7 million(3) |
|
West Gharib - WI 50% |
US$4.5 - 5.0 million |
US$1.5 million |
|
Morocco - WI 75% |
US$12.5 - 13.0 million |
US$3.0 million |
|
Total |
US$25.5 - 27.0 million |
US$12.2 million |
(1) After completion of the South Disouq disposal with effect from 1 February 2022.
(2) As the legal entity that holds the South Disouq asset is 100% consolidated in the financial statements of the Company, capex guidance is gross of minority interest. Net of minority interest, capex guidance is US$7.5 - 8.0 million.
(3) Includes US$0.3 million of decommissioning provisions. Net of minority interest, SDX's share of capex for the 6 months ended 30 June 2022 was US$6.3 million
· The actual and anticipated timings of planned key capex activities are outlined below:
|
Asset |
Activity |
2022 Timing |
|
South Disouq |
SD-5X (Warda) exploration well |
Q1(1) |
|
SD-12_East appraisal well |
Q2(1) |
|
|
MA-1X (Mohsen) exploration well |
Q2(1) |
|
|
SD-3X Tubing replacement |
Q3(2) |
|
|
SD-3X workover (AM-I) |
Q3 |
|
|
SD-4X workover |
Q3 |
|
|
SD-3X workover (KES) |
Q4 |
|
|
Morocco |
Two well drilling campaign |
Q3 |
|
SAH-4 workover |
Q2 (1) |
|
|
Three well drilling campaign |
Q4'22-Q2'23 |
|
|
West Gharib |
Eight development wells |
Q1(1)-Q4 |
|
Water injection well and facilities upgrades |
Q3-Q4 |
(1) Activity completed
(2) Activity completed post period-end.
o South Disouq : One appraisal well, SD-12_East, and two exploration wells, SD-5X (Warda) and MA-1X (Mohsen), have been drilled during H1 2022. The SD-5X well discovered gas in the basal Kafr El Sheikh sand, with EUR similar to the pre-drill expectation. SD-5X was tied-in and started production 13 May 2022 and is currently producing at around 10 MMscf/d of dry gas and c.100 bbl/d of condensate. The second well in the campaign, SD-12_East (Ibn Yunus North development lease) was successfully drilled and brought onto production just after period end on 1 July 2022 and is currently producing at around 7 MMscf/d, with no condensate. The third and final well of the 2022 South Disouq drilling campaign, MA-1X on the Mohsen prospect in the Exploration Extension Area, is a gas discovery in the primary Kafr El Sheikh Fm reservoir target finding 56.3ft of high-quality net gas pay. A well-test was conducted on MA-1X and is currently being evaluated to determine a commercialisation strategy. Following the disposal transaction, all three wells have been drilled with partner participation. In addition to the drilling activity, several well workovers will be undertaken to maximise recovery from the fields.
o West Gharib: In early January production commenced from MSD-21, the first well in a 13-well campaign that commenced in Q4 2021 and will complete in 2023. The second well of the infill drilling campaign, the MSD-25, reached TD on 22 February 2022, encountering 85ft of oil pay sand. MSD-25 was then completed, tied-in and brought on-line. Following MSD-25, the drilling campaign continued with MSD-20, MSD-24 and MSD-23. MSD-24 encountered 86.5ft of net oil pay sand, MSD-23 encountered 131.5ft of net oil pay. Both wells have been tied-in and brought on-line. MSD-20 spudded on 5 April 2022 but encountered technical difficulties, but at period end operations were continuing at this well. The fifth well, MSD-27, spud on 22 July 2022 and today the Company announced that MSD-27 encountered the primary top Asl Formation reservoir at 3,927 feet MD (3,119 feet TVDSS) and reached a TD of 4,412 feet MD on 7 August. The well encountered 137.3 feet of good-quality, net oil pay sandstone, with an average porosity of 22.8% in the Asl Formation reservoir. MSD-27 will now be tied-in to the existing facilities and flow tested. A total of eleven well workovers across the concession were completed during H1 2022 relating to a variety of operations (sand clean-out, tubing replacement, pump replacement, recompletion to shallower reservoirs).
o Morocco: The Company concentrated on maximising recovery from its existing well stock, utilising the two compressors we have in the field. In April 2022, the SAH-4 well was worked over and recompleted to the Upper Guebbas interval and this well is now contributing to production. Much of H1 2022 was spent on planning and preparing for the 2022 drilling campaign and for well workovers to access behind-pipe opportunities. In the second half of 2022, SDX will be conducting a two well drilling campaign targeting around a gross unrisked 1.1 bcf EUR. Post period end, the drilling rig was mobilised to the first well location, SAK-1, with a planned spud in August. The SAK-1 well, if successful, will open a new area for exploration and exploitation in future drilling campaigns. After the two wells, the rig will go to another operator before returning to SDX at the end of 2022, to potentially drill a third well before the year end. Workovers of existing wells, including re-perforation and sliding sleeve operations to exploit behind-pipe reserves, will continue throughout 2022, with operations to start in August 2022 on the KSR-8 well (sliding sleeve operation), followed by KSR-10 and, depending on results, KSR-11 and then SAH-W1.
H1 2022 ESG metrics
· The Company's operated assets recorded a carbon intensity of 3.8kg CO2e/boe in 2022, which is one of the lowest rates in the industry.
· Scope 1 greenhouse gas emissions at operated assets were 5,100 tons of CO2e. Scope 3 greenhouse gas emissions in Morocco were 50,100 tons of CO2e, which is approximately 25,400 tons of CO2e less than using alternative heavy fuel oil.
· There were no Lost Time Injuries at any of the Company's assets during H1 2022.
· No produced water was discharged into the environment in Morocco (100% contained and evaporated) or at South Disouq (100% recycled).
· There were no hydrocarbon spills at operated assets.
· The Company continues to adopt high standards of Governance through its adherence to the QCA Code on Corporate Governance.
Six months to 30 June 2022 Financial Update
· H1 2022 Netback was US$17.9 million, US$4.2 million (19%) lower than the Netback of US$22.1 million for H1 2021, driven by:
o Net revenue decrease of US$4.8 million compared to the same period in 2021 due to:
o US$4.8 million lower revenue in Morocco compared to the same period in 2021 due to the non-renewal of an expired customer contract and slightly lower realised pricing due to adverse FX movement;
o US$0.9 million lower South Disouq revenue compared to the same period in 2021, due to lower production partly offset by improved condensate pricing; and
o US$0.9 million higher revenue at West Gharib compared to the same period in 2021 due to higher realised service fees (2022: US$83.45/bbl, 2021: US$51.10/bbl), partly offset by lower production (2022: 376 bbl/d, 2021: 516 bbl/d).
o Operating costs decreased by US$0.6 million from the prior year due to lower production at South Disouq and West Gharib.
· H1 2022 EBITDAX was US$15.3 million, US$4.6 million (23%) lower than EBITDAX of US$19.9 million for H1 2021, mainly as a result of the decrease in Netback described above.
· The main components of SDX's comprehensive loss (before minority interest) of US$1.2 million for H1 2022 are:
o US$17.9 million Netback;
o US$0.5 million of E&E expense which relates to ongoing new venture activity (predominantly internal management time);
o US$10.4 million of DD&A expense reflects lower production across all assets and a lower depreciable asset base at South Disouq following the impairment recorded during Q4 2021;
o US$2.0 million of ongoing G&A expense;
o US$0.8 million of transaction costs
o US$2.2 of FX loss following the devaluation of the Egyptian Pound during the first six months of the year; and
o US$3.2 million of corporate tax, being Egyptian corporate income tax (South Disouq: US$2.3 million, West Gharib: US$0.8 million) and corporate social tax in Morocco (US$0.1 million).
Operating cash flow (before capex)
· H1 2022 operating cash flow (before capex) of US$10.4 million, was lower than the same period in 2021 of US$14.9 million, primarily due to prepayments made in June 2022 and income taxes paid during Q2 2022.
KEY FINANCIAL & OPERATING HIGHLIGHTS
|
|
|
|
|
|
|
|
|
Prior Quarter |
Three months ended 30 June(3) |
Six months ended 30 June |
||
|
$000s except per unit amounts |
|
2022 (unaudited) |
2021 (unaudited) |
2022 (unaudited) |
2021 (unaudited) |
|
FINANCIAL |
|
|
|
|
|
|
Net revenues |
11,235 |
11,098 |
13,725 |
22,333 |
27,108 |
|
Operating costs |
(2,071) |
(2,321) |
(2,363) |
(4,392) |
(4,979) |
|
Netback (1) |
9,164 |
8,777 |
11,362 |
17,941 |
22,129 |
|
EBITDAX (1) |
8,212 |
7,062 |
10,103 |
15,274 |
19,914 |
|
Total comprehensive loss |
(579) |
(624) |
(10,699) |
(1,203) |
(10,086) |
|
Total comprehensive loss attributable to SDX shareholders |
(149) |
(612) |
(10,699) |
(671) |
(10,086) |
|
Net loss per share - basic |
$(0.001) |
$(0.003) |
$(0.052) |
$(0.004) |
$(0.049) |
|
Cash, end of period |
12,145 |
15,272 |
9,108 |
15,272 |
9,108 |
|
Capital expenditures |
3,244 |
8,929 |
11,875 |
12,173 |
15,839 |
|
Total assets |
98,916 |
103,607 |
114,645 |
103,607 |
114,645 |
|
Shareholders' equity |
77,641 |
77,073 |
86,430 |
77,073 |
86,430 |
|
Common shares outstanding (000's) |
205,378 |
204,563 |
205,378 |
205,563 |
205,378 |
|
|
|
|
|
|
|
|
OPERATIONAL |
|
|
|
|
|
|
West Gharib production service fee (bbl/d) |
388 |
363 |
490 |
376 |
516 |
|
South Disouq gas sales (boe/d) (2) |
3,610 |
3,460 |
4,313 |
3,534 |
4,204 |
|
Morocco gas sales (boe/d) |
640 |
635 |
964 |
638 |
993 |
|
Other products sales (boe/d) (2) |
183 |
175 |
235 |
179 |
218 |
|
Total sales volumes (boe/d) (2) |
4,821 |
4,633 |
6,002 |
4,727 |
5,931 |
|
|
|
|
|
|
|
|
Realised West Gharib service fee (US$/bbl) |
$78,51 |
$88.66 |
$54.61 |
$83.45 |
$51.10 |
|
Realised South Disouq gas price (US$/Mcf) |
$2.85 |
$2.85 |
$2.83 |
$2.85 |
$2.85 |
|
Realised Morocco gas price (US$/Mcf) |
$11.11 |
$10.60 |
$11.49 |
$10.86 |
$11.40 |
|
|
|
|
|
|
|
|
Royalties ($/boe) |
$5.56 |
$6.17 |
$5.02 |
$5.86 |
$4.93 |
|
Operating costs ($/boe) |
$4.77 |
$5.50 |
$4.33 |
$5.13 |
$4.64 |
|
Netback ($/boe) (1) |
$21.12 |
$20.82 |
$20.81 |
$20.97 |
$20.61 |
|
|
|
|
|
|
|
(1) Refer to the "Non-IFRS Measures" section of this release below for details of Netback and EBITDAX.
(2) Sales volumes from the South Disouq concession have been presented gross of minority interest. For the period 1 February (transaction effective date) to 30 June 2022, the share of volumes assigned to the Company's minority interest holder equals 1,003 boe/d and therefore the Company's share of South Disouq volumes (incl. other products) equals 2,710 boe/d. Net of minority interest total sales volumes are 3,724 boe/d.
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Consolidated Balance Sheet (unaudited) |
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(US$'000s) |
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|
|
As at 30 June 2022 |
As at 31 December 2021 |
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
15,272 |
10,562 |
||
|
Trade and other receivables |
|
|
17,991 |
19,942 |
||
|
Inventory |
|
|
|
|
7,591 |
6,747 |
|
Current assets |
|
|
|
40,854 |
37,251 |
|
|
|
|
|
|
|
|
|
|
Investments |
|
|
|
3,375 |
3,593 |
|
|
Property, plant and equipment |
|
|
31,589 |
34,593 |
||
|
Exploration and evaluation assets |
|
|
26,647 |
21,611 |
||
|
Right-of-use assets |
|
|
|
1,142 |
1,367 |
|
|
Non-current assets |
|
|
|
62,753 |
61,164 |
|
|
|
|
|
|
|
|
|
|
Total assets |
|
|
|
|
103,607 |
98,415 |
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
Trade and other payables |
|
|
15,542 |
17,157 |
||
|
Decommissioning liability |
|
|
- |
22 |
||
|
Current income taxes |
|
|
|
906 |
1,150 |
|
|
Borrowings |
|
|
|
2,500 |
- |
|
|
Lease liability |
|
|
|
381 |
439 |
|
|
Current liabilities |
|
|
|
19,329 |
18,768 |
|
|
|
|
|
|
|
|
|
|
Decommissioning liability |
|
|
6,117 |
5,747 |
||
|
Deferred income taxes |
|
|
|
290 |
290 |
|
|
Lease liability |
|
|
|
798 |
956 |
|
|
Non-current liabilities |
|
|
|
7,205 |
6,993 |
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
|
26,534 |
25,761 |
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
Share capital |
|
|
|
2,601 |
2,601 |
|
|
Share premium |
|
|
|
130 |
130 |
|
|
Share-based payment reserve |
|
|
7,658 |
7,536 |
||
|
Accumulated other comprehensive loss |
|
(917) |
(917) |
|||
|
Merger reserve |
|
|
|
37,034 |
37,034 |
|
|
Retained earnings |
|
|
|
22,773 |
26,270 |
|
|
Non-controlling interest |
|
|
|
7,794 |
- |
|
|
|
|
|
|
|
|
|
|
Total equity |
|
|
|
|
77,073 |
72,654 |
|
|
|
|
|
|
|
|
|
Equity and liabilities |
|
|
|
103,607 |
98,415 |
|
|
Consolidated Statement of Comprehensive Income (unaudited) |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
Three months ended 30 June |
Six months ended 30 June |
|
||||
|
(US$'000s) |
|
|
|
|
2022 |
2021 |
2022 |
2021 |
|
|||
|
Revenue, net of royalties |
|
|
11,098 |
13,725 |
22,333 |
27,108 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Direct operating expense |
|
|
(2,321) |
(2,363) |
(4,392) |
(4,979)) |
|
|||||
|
Gross profit |
|
|
|
|
8,777 |
11,362 |
17,941 |
22,129 |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Exploration and evaluation expense |
(285) |
(10,612) |
(534) |
(10,880) |
|
|||||||
|
Depletion, depreciation and amortisation |
(5,091) |
(7,521) |
(10,366) |
(14,945) |
|
|||||||
|
Share-based compensation |
|
(56) |
(50) |
(122) |
(313) |
|
||||||
|
Share of profit from joint venture |
141 |
108 |
262 |
223 |
|
|||||||
|
General and administrative expenses |
|
|
|
|
|
|||||||
|
- Ongoing general and administrative expenses |
(1,035) |
(1,317) |
(2,042) |
(2,264) |
|
|||||||
|
- Transaction costs |
|
|
(765) |
- |
(765) |
- |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Operating income/(loss) |
|
|
1,686 |
(8,030) |
4,374 |
(5,911) |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Finance costs |
|
|
|
(97) |
(334) |
(188) |
(276) |
|
||||
|
Foreign exchange loss |
|
(652) |
(70) |
(2,238) |
(162) |
|
||||||
|
Income/(loss)e before income taxes |
937 |
(8,253) |
1,948 |
(6,407) |
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Current income tax expense |
|
(1,561) |
(2,446) |
(3,151) |
(3,679) |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Loss and total comprehensive loss for the period |
(624) |
(10,699) |
(1,203) |
(10,086) |
|
|||||||
|
Attributable to |
|
|
|
|
|
|||||||
|
SDX shareholders |
(612) |
(10,699) |
(761) |
(10,086) |
|
|||||||
|
Non-controlling interests |
(12) |
- |
(442) |
- |
|
|||||||
|
|
|
|
|
|
|
|||||||
|
Net loss, attributable to SDX shareholders, per share |
|
|
|
|
|
|||||||
|
Basic |
|
|
|
|
|
$(0.003) |
$(0.052) |
$(0.004) |
$(0.049) |
|
||
|
Diluted |
|
|
|
|
$(0.003) |
$(0.052) |
$(0.004) |
$(0.049) |
|
|||
|
Consolidated Statement of Changes in Equity (unaudited) |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended 30 June |
|
|
(US$'000s) |
|
|
|
|
2022 |
2021 |
|
|
|
|
|
|
|
|
|
Share capital |
|
|
|
|
|
|
|
Balance, beginning of period |
|
|
2,601 |
2,601 |
||
|
Balance, end of period |
|
|
|
2,601 |
2,601 |
|
|
|
|
|
|
|
|
|
|
Share premium |
|
|
|
|
|
|
|
Balance, beginning of period |
|
|
130 |
130 |
||
|
Balance, end of period |
|
|
|
130 |
130 |
|
|
|
|
|
|
|
|
|
|
Share-based payment reserve |
|
|
|
|
||
|
Balance, beginning of period |
|
|
7,536 |
7,269 |
||
|
Share-based compensation for the period |
|
122 |
174 |
|||
|
Balance, end of period |
|
|
|
7,658 |
7,443 |
|
|
|
|
|
|
|
|
|
|
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 |
|
|
26,270 |
50,225 |
||
|
Part disposal of subsidiary |
|
|
(2,736) |
- |
||
|
Total comprehensive loss |
|
|
(761) |
(10,086) |
||
|
Balance, end of period |
|
|
|
22,773 |
40,139 |
|
|
|
|
|
|
|
|
|
|
NCI |
|
|
|
|
|
|
|
Balance, beginning of period |
|
|
- |
- |
||
|
Part disposal of subsidiary |
|
|
8,236 |
- |
||
|
Loss for the period |
|
|
(442) |
- |
||
|
Balance, end of period |
|
|
|
22,773 |
- |
|
|
|
|
|
|
|
|
|
|
Total equity |
|
|
|
77,073 |
86,430 |
|
|
Consolidated Statement of Cash Flows (unaudited) |
|
|
|
|
||||
|
|
Three months ended 30 June |
Six months ended 30 June |
|
|||||
|
(US$'000s) |
2022 |
2021 |
2022 |
2021 |
|
|||
|
|
|
|
|
|
|
|||
|
Cash flows generated from/(used in) operating activities |
|
|
|
|
|
|||
|
Income/(loss) before income taxes |
937 |
(8,253) |
1,948 |
(6,407) |
|
|||
|
|
|
|
|
|
|
|||
|
Adjustments for: |
|
|
|
|
|
|||
|
Depletion, depreciation and amortisation |
5,091 |
7,521 |
10,366 |
14,945 |
|
|||
|
Exploration and evaluation expense |
- |
10,313 |
- |
10,313 |
|
|||
|
Finance expense |
97 |
153 |
188 |
334 |
|
|||
|
Share-based compensation charge |
56 |
50 |
122 |
174 |
|
|||
|
Foreign exchange loss/(gain) |
652 |
(137) |
2,238 |
(74) |
|
|||
|
Tax paid by state |
(1,137) |
(1,338) |
(2,302) |
(2,566) |
|
|||
|
Share of profit from joint venture |
(141) |
(108) |
(262) |
(223) |
|
|||
|
Operating cash flow before working capital movements |
5,555 |
8,201 |
12,298 |
16,496 |
|
|||
|
|
|
|
|
|
|
|||
|
(Increase)/decrease in trade and other receivables |
(120) |
1,603 |
2,090 |
(273) |
|
|||
|
Decrease in trade and other payables |
(840) |
(1,057) |
(2,053) |
(763) |
|
|||
|
Payments for inventory |
11 |
73 |
(1,097) |
(512) |
|
|||
|
Payments for decommissioning |
(13) |
- |
(35) |
- |
|
|||
|
Cash generated from operating activities |
4,593 |
8,820 |
11,203 |
14,948 |
|
|||
|
|
|
|
|
|
|
|||
|
Income taxes paid |
(841) |
- |
(841) |
- |
|
|||
|
Net cash generated from operating activities |
3,752 |
8,820 |
10,362 |
14,948 |
|
|||
|
|
|
|
|
|
|
|||
|
Cash flows generated from/(used in) investing activities: |
|
|
|
|
|
|||
|
Property, plant and equipment expenditures |
(3,891) |
(7,409) |
(6,175) |
(10,094) |
|
|||
|
Exploration and evaluation expenditures |
(1,768) |
(1,907) |
(5,369) |
(5,282) |
|
|||
|
Proceeds on part disposal of subsidiary |
3,603 |
- |
5,500 |
- |
|
|||
|
Dividends received |
311 |
- |
311 |
- |
|
|||
|
Net cash used in investing activities |
(1,745) |
(9,316) |
(5,733) |
(15,376) |
|
|||
|
|
|
|
|
|
|
|||
|
Cash flows generated from/(used in) financing activities: |
|
|
|
|
|
|||
|
Net proceeds from loans and borrowings |
2,500 |
- |
2,500 |
- |
|
|||
|
Payments of lease liabilities |
(127) |
(229) |
(261) |
(503) |
|
|||
|
Finance costs paid |
(11) |
(40) |
(17) |
(95) |
|
|||
|
Net cash generated from/(used in) financing activities |
2,362 |
(269) |
2,222 |
(598) |
|
|||
|
|
|
|
|
|
|
|||
|
Increase/(decrease) in cash and cash equivalents |
4,369 |
(765) |
6,851 |
(1,026) |
|
|||
|
|
|
|
|
|
|
|||
|
Effect of foreign exchange on cash and cash equivalents |
(1,242) |
139 |
(2,141) |
78 |
|
|||
|
|
|
|
|
|
|
|||
|
Cash and cash equivalents, beginning of period |
12,145 |
9,734 |
10,562 |
10,056 |
|
|||
|
|
|
|
|
|
|
|||
|
Cash and cash equivalents, end of period |
15,272 |
9,108 |
15,272 |
9,108 |
|
|||
About SDX
SDX is an international oil and gas exploration, production, and development company, headquartered in London, United Kingdom, with a principal focus on EMEA. 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.
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: +44 203 219 5640
|
|
|
Stifel Nicolaus Europe Limited (Nominated Adviser and Broker) Callum Stewart Jason Grossman Ashton Clanfield Tel: +44 (0) 20 7710 7600
|
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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 |
|
"CO2e/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 |
|
"TVDSS" |
Total vertical depth sub-sea |
|
"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 formulation of the Company's strategic review and expansion plans, the Company's production and capex guidance; liquidity and sources of cash flows for the remainder of 2022, and the Company's 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.
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.
Use of a Standard
Reserve and resource estimates disclosed or referenced herein have been prepared in accordance with the SPE's Canadian Oil and Gas Evaluation Handbook and in accordance with NI 51-101.
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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