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SDX Energy

Gas discovered at South Disouq

Update | Oil & Gas | 19 Apr 2017

SDX has announced it has discovered gas in the Abu Madi structure of the South Disouq SD-1X well. The well came in on prognosis, validating the company’s 3D seismic interpretation, and encountering 65ft of excellent quality net pay with average porosity of 25%. This unlocks 150–300bcf of the estimated 585bcf in the Abu Madi, with the remainder now de-risked in four other structures in the area. We expect this to be a material discovery that will contribute to a significant addition to the company reserves and resources (currently estimated to be 12.03mmboe on a 2P basis), increasing our RENAV from 57p to 76p/share.

SDX Energy

Looking ahead at 2019 work programme

Outlook | Oil & Gas | 03 Jul 2018

In this note, we revisit SDX’s 2017/2018 gas discoveries in Morocco and Egypt and look ahead at the company’s plans to leverage this success to deepen its resource base. In 2019, drilling in Egypt will focus on several Ibn Yunus lookalikes with combined unrisked recoverable volume of c 70bcf and a 17bcf Abu Madi structural trap. In addition, SDX will target a 50mmbo unrisked oil prospect in 2019. In Morocco, SDX has a commendable 87% success rate of discovering gas at Sebou based on calibrated 3D seismic; 2019 targets include 20bcf of gross unrisked resource adding gas-behind-pipe in order to meet anticipated demand growth. Our updated valuation includes planned exploration, appraisal and development activity for 2019 and higher short-term oil price expectations, with valuation rising from 65.6p/share to 92.5p/share (+41%).

SDX Energy

Lalla Mimouna - de-risks demand expectations

Flash note | Oil & Gas | 20 Apr 2018

SDX Energy has discovered gas at the LNB-1, Morocco with 300m of gas-bearing horizons discovered in an over-pressured section in the Lafkarena sequence. Heavy hydrocarbons contained in gas indicate a thermogenic hydrocarbon source rock, indicative of a new petroleum system that has previously not been encountered at Sebou. Preliminary estimates of recoverable gas at LNB-1 are un-risked mid-case volume of 10.2bcf with 55kbbls of condensate. This is significantly larger than the traps encountered at Sebou and exceeds the threshold for commerciality for a processing facility and pipeline to Sebou area. LNB-1 awaits logging and testing which will be carried out in due course once suitable equipment can be mobilised. We see this a material discovery for SDX, should flow tests confirm productivity, for two reasons: 1) well costs are marginally higher than at Sebou at c $2.7m but with un-risked recoverable volumes five times greater, per-well returns are likely to be significantly superior. In addition, once de-risked, the new play at Lalla Mimouna has the potential to rapidly de-risk SDX’s ability to meet projected gas demand in Kenitra. 2) liquids discovered at LNB-1 open up a new play fairway with potential to provide SDX with an additional revenue stream in Morocco that is not constrained by demand.

SDX Energy

Ibn Yunus-1 de-risking Abu Madi Baltim trend

Flash note | Oil & Gas | 12 Apr 2018

SDX Energy has announced results from the Ibn Yunus-1 well at South Disouq, Egypt (SDX 55%). Ibn Yunus-1 is the second consecutive gas discovery at South Disouq (after SD-1X) and encountered 100.8 net meters of conventional pay in the Abu Madi horizon, with average porosity of 28.5%. The well came in on prognosis but with a reservoir thickness and quality above pre-drill expectations. We expect to de-risk Ibn Yunus on flow testing; however, indicatively moving to an 80% chance of success (equivalent to our risking for SD-1X) from 32% would add 4.4p/share to our RENAV in our 90bcf recoverable case. We recently published a detailed update on our view of the group valuation, which stands at a core NAV of 58.3p/share and RENAV of 65.6p/share.

SDX Energy

Strong operational netback

Flash note | Oil & Gas | 23 Mar 2018

SDX Energy has reported FY17 results, which reflect the positive impact of the late January 2017 acquisition of Circle Oil’s Egyptian and Moroccan business, strong netbacks and Egyptian receivable recovery. Netback, defined as sales net of operating expense and government royalties, stood at $28.9m and compares with our estimated $26.4m. Cash at year-end 2017 stood at $25.8m and has since grown to $30.6m as at 28 February 2018 after a further $6m in backdated receivables was recovered. We recently published a detailed update on our view of Moroccan gas sales and group valuation, which stands at a core NAV 58.3p/share and RENAV of 65.6p/share.

SDX Energy

SAH-2 gas discovery

Flash note | Oil & Gas | 09 Mar 2018

SDX Energy has announced results from the SAH-2 well on the Sebou permit in Morocco (SDX 75%). SAH-2 is the seventh well in the company’s nine-well programme, and the fifth gas discovery. SAH-2 encountered 5.2 net meters across two pay zones, with average porosity of 33%. The well came in on prognosis but with a reservoir thickness above pre-drill expectations. This result will support the company’s previously announced planned production increase in Morocco to 8-10mmscfd by the end of 2018. We recently published a detailed update on our view of Moroccan gas sales and group valuation, which stands at a core NAV 58.3p/share and RENAV of 65.6p/share.

SDX Energy

KSS-2 well result - non-commercial

Flash note | Oil & Gas | 21 Feb 2018

SDX Energy has announced results from the KSS-2 well on the Sebou permit in Morocco (SDX 75%). KSS-2 is the sixth well in the company’s nine-well programme, with four discoveries to date. KSS-2 encountered eight net meters of high-quality reservoir, but had low gas saturation and was deemed to be non-commercial. This result is not expected to affect the company’s previously announced planned production increase in Morocco to 8-10mmscfd by the end of 2018. We recently published a detailed update on our view of Moroccan gas sales and group valuation, which stands at core NAV 58.3p/share and RENAV 65.6p/share.

SDX Energy

ONZ-7 - highest flow rate to date

Flash note | Oil & Gas | 06 Feb 2018

SDX Energy has announced the completion of the ONZ-7 well on the Sebou permit in Morocco (SDX 75%) with the well delivering an average flow rate of 10mmscfd and maximum flow of 15.3mmscfd, the highest flow rate to date from the four successful wells drilled and in the basin historically. ONZ-7 provides confidence in gas deliverability and the resource base as SDX expands its customer base in Kenitra. Edison recently published a detailed update on our view of Moroccan gas sales and group valuation, which stands at core NAV of 58.3p/share and RENAV of 65.6p/share.

SDX Energy

Morocco - a simple, low-cost operation with growth

Update | Oil & Gas | 30 Jan 2018

Key takeaways from SDX’s analysts’ site visit to Morocco include the asset’s operational simplicity and low operating costs. Realised gas prices averaging $10/mcf combined with a 10-year tax holiday drive unit netbacks in the $8.5-9.0/mcf range. Demand growth potential in Kenitra, the fourth largest industrial town in Morocco, was very visible with the emphasis on SDX to grow the company’s gas resource base in order to underpin contract base expansion. SDX’s 2017/18 well programme should go some way to deliver on a 2018 production target of an 8-10mmscfd exit rate, and we estimate the market could support an incremental 10-11 wells of gas resource in 2019/2020. We have increased our core NAV from 52.5p/share to 58.3p/share (+11%) and RENAV from 64.0p/share to 65.6p/share (+3%).

SDX Energy

Gas discovery ONZ-7

Flash note | Oil & Gas | 23 Jan 2018

SDX Energy has announced the discovery of gas at the ONZ-7 development well on the Sebou permit in Morocco. The ONZ-7 well was drilled to a total depth of 1,167m, with 5m of net conventional gas pay in the Hoot formation. Reservoir quality exceeded initial expectations with porosity in the pay section at 35.3% – a further update on well flow rates is expected in early February. SDX has made four discoveries from five wells drilled in the current nine well campaign – an 80% E&A success rate with all prospects drilled on high resolution 3D seismic discovering gas. Our last published valuation stands at 65p/share (full NAV breakdown), with Sebou making up c 17% or 10.9p/share of our group risked valuation. We intend to revise our valuation for recent Moroccan exploration success on our return from the company’s analyst site visit to be held on 24 and 25 January 2018.

SDX Energy

KSR-16 flow exceeds expectations

Flash note | Oil & Gas | 11 Jan 2018

SDX Energy has announced the completion of the KSR-16 well on the Sebou permit in Morocco (SDX 75%) with the well delivering a restricted flow rate of 8.43mmscfd, exceeding management expectations, and the highest flow rate to date from the three successful wells drilled to date. KSR-16 is now on production.

SDX Energy

Solid well results kick off the campaign

Update | Oil & Gas | 19 Oct 2017

SDX Energy has announced two successful well results in recent weeks, with additional oil discovered in Egypt and more net pay found in its first Moroccan gas well than expected. The next six months are busy ones for SDX, with eight more wells to be drilled in Morocco to supply a high value gas market. Two wells will be drilled in Egypt to delineate its existing South Disouq discovery and two exploration wells will target prospects that could materially increase the gas resources. In addition, programmes at NW Gemsa and Meseda should materially increase production. Our NAV increases from 64p to 65p/share (increases in absolute terms are partially offset by foreign exchange movements).