SDX Energy provides an update on the South Disouq SD-12X well achieving first gas, its unaudited operating results, cash and liquidity position for the twelve months ended 31 December 2020 and its planned drilling campaigns for 2021. 

Mark Reid, CEO of SDX, commented:
"I am very pleased to be able to announce a strong end to 2020 and a promising start to 2021 with our SD-12X (Sobhi) well, where we have 100% entitlement interest, coming on stream six weeks ahead of schedule. Production from two of our three core assets beat 2020 guidance (being South Disouq and Morocco, where production is now back to pre-Covid close down levels) while our third core asset (West Gharib) came in at the top end of guidance.  Furthermore, as a result of our continued focus on capital discipline, I am pleased to report that our 2020 capex spend was approximately US$1million lower than our guidance of US$26million.

Our strong performance in 2020 means that we finished the year debt-free with c.US$9.6million of cash and US$2.5million of undrawn availability from our EBRD facility, which will increase to US$10million in the coming months after the standard conditions precedent in our new facility are satisfied.  When viewed in light of a year which was full of operational challenges and volatile commodity prices, I see our robust cash generation as a hallmark of our business and is testament to the commitment of the team at SDX. We have started 2021 in a very positive position with an exciting programme of nine wells to be drilled in the year and I expect us to build on the successes of 2020 by discovering more resource and continuing our resilient cash generation."   

South Disouq, Egypt operations update - SD-12X first gas six weeks ahead of schedule

• Following the success of the SD-12X exploration well (100% W.I.) in Q2'20, being a commercial discovery in the Kafr el Sheikh ("KES") formation, the Company achieved first gas from the well on 21 December 2020, approximately six weeks ahead of schedule.
• Management estimates that SD-12X has approximately 24 bcf of recoverable resources and can produce at a rate of up to 10-12 MMscf/d. At present, the well is producing at approximately 5-7 MMscf/d and will continue to be monitored to determine its optimum production rate. SDX has a 100% working interest in the production from this well.
• Trading and operations update twelve months to 31 December 2020

Production

• Average entitlement production for the year of c.6,400 boe/d, an increase of 58% from FY 2019 and exceeding 2020 guidance of 6,000-6,250 boe/d.
• Moroccan customers back to their March 2020 pre-Covid close down consumption levels.
• Production from all core assets either exceeded or was at the top end of guidance.

Cash and liquidity

• Cash and liquidity remain strong with cash of c.US$9.6 million (unaudited) as at 31 December 2020 and the EBRD credit facility remaining undrawn with US$2.5 million of availability.
• The Company has agreed a new five-year, US$10 million facility, with EBRD which is expected to be available for drawing before the end of Q1'21 upon satisfaction of standard conditions precedent.
• Together with cash generated from operations, the Company is fully funded for all of its planned activities in 2021.

2021 Drilling and prospectivity: Nine wells to be drilled in 2021

Two wells in South Disouq, Egypt (55% W.I.)

• Following the success of SD-12X at South Disouq and upon further review of the 3D seismic, management has high-graded c.233bcf of mean unrisked recoverable volumes, which are close to our existing infrastructure, located in horizons that are either productive in South Disouq or in adjacent blocks, and which are now viewed as ready-to-drill prospects.
• During Q2 and Q3'21 the Hanut prospect, which Company estimates has an unrisked mean recoverable volumes of 139bcf with a 33% chance of success, will be drilled, together with Ibn Yunus-2, a development well, into our existing 46Bcf producing discovery at Ibn Yunus which will further accelerate production and ensure that the CPF throughput continues to be optimised.
• The net drilling costs to the Company of these two wells, reflecting the dry hole cost of Hanut only, is estimated at US$3.6 million and the net tie in cost of Ibn Yunus-2 is US$0.3 million. The Company's partner in the concession has now confirmed that it will participate in both of these wells.

Three wells in West Gharib (50% W.I.)

• The Company plans to drill a minimum of three development wells in the concession during 2021 with the campaign expected to commence in Q2/Q3'21.
• The three wells are targeting approximately gross 1 million barrels of recoverable resources and each of these wells is expected to produce gross 300-400bbl/d.
• The net cost of the campaign to the Company, including tie in, is expected to be c.US$1.5 million.

Four wells in Morocco (75% W.I.)

• During the year, the Company will drill four 'close to infrastructure' appraisal/development wells, two of which will be deepened to target the newly discovered Top Nappe play.  The LMS-2 discovery will also be tested in 2021.
• The campaign which will commence in early Q2'21 and complete late Q3/early Q4'21 will target approximately gross 2 bcf of recoverable resources, excluding the volumes in any potential Top Nappe prospects, which are still being assessed.
• Including tie in costs, the campaign is expected to cost the Company c.US$12 million.

KeyFacts Energy: SDX Energy Egypt country profile