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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

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).

SDX Energy

Significant work programme starting

Update | Oil & Gas | 29 Sep 2017

SDX Energy has completed the $10m equity raising to fund an accelerated drilling programme in Egypt and Morocco. This means it will be drilling wells with unrisked returns generating IRRs of more than 100%, according to the company, underlining the value of the H217 drilling programme. After the fund-raise, SDX will be fully funded to take the South Disouq discovery to first gas in early 2018, and to drill two exploration wells to explore for a further 150bcf in Egypt while increasing its Moroccan drilling programme to nine wells to boost resources and increase production. These will have the effect of increasing certainty on future developments and bringing forward valuable cash flows. These positive effects have been offset by a reduction in our long-term oil price assumption and some modelling adjustments. Our full NAV is now 64p/share.

SDX Energy

Raising accelerates growth potential

Flash note | Oil & Gas | 06 Sep 2017

SDX has announced a £10m equity raise targeting an accelerated exploration and development well programme (in addition to its existing aggressive work programme). Two wells in Egypt will target the largest prospects close to South Disouq and aim to de-risk up to 150bcf (P50) of the prospective resources, and enable SDX to right-size the production facilities for the most economic development. In Morocco, two further wells will target around 2bcf of gas that can be quickly developed and sold at high netback prices. As such, the £10m (65% underwritten by the largest shareholder) will go entirely to growth projects that have high IRRs/NPVs, and speed up the exploitation of its development resources. The company remains in strong financial health, but the additional capital will add further momentum to realising value from the portfolio. We will update our forecasts and valuation in coming days, which currently stand at 55p/share (core NAV) and 67p/share (RENAV).

SDX Energy

H217 growth programme starting up

Flash note | Oil & Gas | 25 Aug 2017

In the half year results, SDX Energy reported H117 attributable production of 3,351boe/d. This drove Q217 revenues of $9.9m (compared to $8.1m in Q117) as the Moroccan assets were fully integrated. Cash flows increased markedly to $8.1m after sizeable reduction in working capital in Q217; cash has increased by $6.6m to $27.6m. The company remains on track for significant operational improvements in H217, with 12 workovers planned at NW Gemsa, facility upgrade and workover programme at Meseda and preparations for development at South Disouq. In Morocco, five development/appraisal wells and two exploration wells are planned to enable future increases in sales to the gas-hungry market. We look forward to the plans the company has for South Disouq. Our core NAV is unchanged at 55p/share (RENAV 67p/share)

SDX Energy

Material growth still to come

Outlook | Oil & Gas | 19 Jul 2017

SDX Energy is a North Africa-focused E&P with production in Egypt and Morocco. The company benefits from strong cash flow generation from its oil production (Egypt) and high value gas production in Morocco, which is being re-invested to increase production markedly in H217. The company added to its portfolio in early 2017 and continues to seek other opportunities. We have adjusted our valuation, which sees the core NAV increase to 55p/share (from 40p/share) but RENAV fall to 67p/share. With further success in exploration at South Disouq this could grow further.

SDX Energy

CPR results confirm South Disouq

Flash note | Oil & Gas | 05 Jul 2017

SDX Energy has released the results of an independent resource audit on its South Disouq discovery. Gaffney, Cline & Associates has assigned gross 2C resources of 47bcf and 2.3mmbbls and a further 180bcf and 8.7mmbbls of gross prospective resources. The company is in discussion to get production as early as possible to generate cashflows and value. Elsewhere, progress is being made at NW Gemsa and Meseda that should see production increases by year end. In Morocco, a campaign of seven wells is planned and should start in the next six weeks. We are reviewing our model and will update our valuation (currently 76p/share) in time.