SDX Energy highlights Egypt and Morocco program in Q3 results

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AIM-listed SDX Energy closed out the nine months ending September 30 with a significant increase in production, the completion of a two-well drilling program and plans to accelerate its 2021/2022 drilling program in Egypt, with cash in the bank to fully fund these operations.

Operational Highlights

  • Average entitlement production of 6,646 boepd, which represents an increase of 90% from the nine months to September 30, 2019 (3,501 boepd) and 64% higher than average production during FY 2019 (4,062 boepd) due to strong production levels mainly from its South Disouq asset in Egypt, which delivered gross production of 48.6 MMscf/d of dry gas and 467 bpd of condensate (51.4 MMscfe/d) equating to 4,710 boepd net to SDX.
  • Existing full year production guidance is maintained across all assets at 6,000 – 6,250 boepd, which is 48-54% higher than 2019 actual production and existing full year capex guidance is also maintained at $26.2 million, the majority of which has already been incurred.
  • The South Disouq two-well drilling campaign was completed during the period, with the second well, SD-12X (100% working interest to SDX), being a commercial discovery in the Kafr el Sheikh formation, and management estimating 24 Bcf of recoverable resources. Construction is underway to connect SD-12X to the Company’s gas processing plant via a 5.8km flow line to the Ibn Yunus-1X well location with production expected in Q1 2021. Based upon well-test data, it is anticipated that when connected, the well will produce at a stabilized rate of 10-12 MMscf/d.
  • Following further review of the 3D seismic at SD-12X, c.233 Bcf of close to infrastructure, mean unrisked recoverable volumes, located in productive horizons have been high-graded to ready-to-drill prospects.
  • Subject to receipt of final Ministerial and Parliamentary approval, the Company plans to accelerate its drilling campaign to Q2/Q3 2021 from H1 2022 with the drilling of the Hanut prospect targeting 139 Bcf. The Company’s partner has still to advise whether it will participate in the well. The campaign will commence with the Company and its partner drilling the IY-2X well, a development well accessing reserves in the eastern portion of the Ibn Yunus field, to bring forward production and cash flow from this asset. The Company expects to drill the Mohsen and Warda prospects, targeting 26 Bcf and 14 Bcf respectively, in 2022.
  • The period saw the sale of the Group’s non-core North West Gemsa asset in Egypt with the net $1.6 million proceeds exceeding management’s expectations as well as showing the ongoing focus and commitment to capital discipline and careful management of the Group’s portfolio whilst also providing additional cash to further strengthen its balance sheet.
  • Moroccan drilling campaign has resulted in seven discoveries from nine wells drilled to date, with the tenth well, LMS-2, completed and awaiting crew mobilization for testing, which is now expected in 2021 due to continued COVID-19 restrictions on moving people and equipment in and out of Morocco.
  • Further analysis of the LMS-2 well results and a re-interpretation of the 3D seismic across SDX’s concessions has revealed that structures similar to LMS-2 are present throughout the Company’s acreage. This new prospectivity is located in horizons that are slightly deeper than the Company’s core production and development area and the areas previously targeted in Lalla Mimouna. Work is ongoing to further define the scale of this prospectivity and, subject to a successful flow test of LMS-2, the intention is to target it as part of the planned 2021 Moroccan drilling campaign which we will also seek to accelerate into H1 2021.
  • Gas consumption levels at SDX’s Morocco customers have returned to c.90% of pre-COVID-19 levels.
  • Post period end, the Company agreed to the disposal of its non-core 12.75% working interest in the South Ramadan concession, located offshore in the Gulf of Suez, Egypt. The purchaser, International Oil Services, a private Egyptian oil and gas company, has already paid the $0.5 million consideration for the Company’s interest, which is in excess of management’s internal valuation of the asset.

Mark Reid, CEO of SDX, commented: “’I am pleased to report another strong period of production and cash generation from our portfolio in what remains a challenging period for businesses globally. Despite this, we reiterate our production guidance for 2020 and feel that we are in a very strong position to continue our excellent cash generation with approx. 90% of revenues being derived from our fixed price gas contracts. Our discovery at the SD-12X well in Egypt towards the beginning of the year is quickly being developed with initial production expected in Q1 2021.

“Growth remains a key focus for the Management team at SDX and we were pleased to announce the identification of c.233bcf of close to infrastructure resource in drill-ready prospects at our South Disouq concession. In Q2/Q3 2021, the Company will drill the Ibn Yunus-2 development well to accelerate production from our existing discovered reserve base.  Immediately following this, the Hanut prospect will target 139bcf of the 233bcf of newly identified resource and in 2022, two further wells will target another 40 bcf. In line with our ongoing focus on shareholder value creation, we continue to assess the optimum allocation of capital, whether that be investment into organic or inorganic growth projects, or returning capital to shareholders.  Our final decision on this will always be taken with the best interests of shareholders in mind.

“We remain confident in the Group’s outlook and its potential to grow significantly in the months ahead.”

 

Source: Petroleum Africa

The post SDX Energy highlights Egypt and Morocco program in Q3 results appeared first on Energy News | Oil and Gas News.

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