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SDX Energy at record production with strong cash flow

Snapshot

This year, SDX Energy announced a new discovery at the South Disouq project, with the SD-12X (Sobhi) well encountering 108 feet of net high-quality gas-bearing sands

Egypt

Quick facts: SDX Energy Inc

Price: 16.5 GBX

AIM:SDX
Market: AIM
Market Cap: £33.89 m
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  • North Africa-focused, exploration and production company
  • Development and exploration assets across Egypt and Morocco
  • Plenty of upside on its acreage says brokers

How is it doing:

In April, SDX Energy announced a new discovery at the South Disouq project, with the SD-12X (Sobhi) well encountering 108 feet of net high-quality gas-bearing sands and this has been higher production.

In its latest half-year, the Egypt and Morocco-focused oil and gas firm confirmed 97% production growth versus the same period in the preceding year – with entitlement production amounting to 6,980 barrels of oil equivalent per day (boepd).

Production growth was driven by output from the South Disouq field, which continued to perform ahead of expectations. It contributed some 4,825 boepd net to SDX.

Two wells were drilled at South Disouq and plans are underway to connect those new wells into production facilities. SDX is also working to ‘high grade’ more South Disouq prospects and targets for drilling.

First half 2020 revenue was reported at US$22mln, up from US$15.5mln at the same stage in 2019, while underlying earnings (EBITDAX) totalled US$15.3mln versus US$9.3mln in H1 2019.

The company reported a comprehensive loss of US$4mln after US$4.5mln of non-cash write-offs, US$12mln of depletion, depreciation and amortisation and US$19.4mln of capital expenditure.

SDX said it generated US$10mln of cash from operations and ended June 2020 with US$9.3mln. The company noted that it is fully funded for all planned activities in 2020.

What the boss says: Mark Reid, chief executive 

“We enter the second half of 2020 in a very strong position with minimal upcoming capital commitments, a strong balance sheet, and a portfolio of fixed and high price gas assets which will generate significant free cash flow,” Reid added.

“We will continue to implement our strategy for the remainder of the year, focusing on ways that we can further grow the business, both organically and inorganically, in the best interests of all stakeholders."

Inflexion points

  • South Disouq ramp-up 
  • Drill programmes and well results 
  • Partnering possibilities

What the brokers say

Peel Hunt, which has a 'buy' rating and 35p target price, noted that following the integration of the Sobhi discovery in Egypt management estimates that there is an additional 100b billion cubic feet (Bcf) cf of unrisked prospective resource across the South Disouq concession (SDX operator with 55%).

This is split amongst five prospects, with 25% of this in a new ‘buried hill’ type play that is productive in a neighbouring field.

In Morocco, a successful test in LMS-2 could create 1.5 billion cubic feet (Bcf) of 2P reserves and simultaneously de-risk 6.0Bcf of potential reserves in the same structure plus a further 3.4Bcf nearby, added SP Angel.

 

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