SDX Energy has announced its unaudited financial and operating results for the six months ended 30 June 2023. All monetary values are expressed in United States dollars net to the Company unless otherwise stated.
H1 2023 Highlights
- Net Production, 3,291 boe/d (459 bbls/d and 17.0 mmscf/d)
- Out of three wells completed across SDX's portfolio in the year to date, two were put on production during H1 2023.
- Carbon intensity of 4.5kg CO2e/boe at operated assets during H1 2023.
- Gross Profit / Netback of $10.1 million, EBITDAX of $8.1 million and operating cash flow (before capex) of $0.9 million.
- Capex $2.9 million.
The first half of 2023 saw a number of strategic and operational initiatives. The key senior management hires, the securing of additional funding, improvements in commercial terms in Morocco and progress in selling our Egyptian assets has brought a new focus and clearly defined strategy to the Group. We enter the last part of 2023, and head into 2024, well placed to deliver long-term sustainable returns to shareholders.
In May 2023, we announced our new Executive team with the appointment of Daniel Gould as Managing Director, William McAvock as CFO and Lesley Maclean as Head of Corporate Development. The new team brings a wealth of experience of the sector and will be focused on delivering on growth initiatives that will create long-term sustainable value.
The first half of 2023 was in many ways a period of revitalising the SDX story. With a new strategy that is based on developing a hybrid energy producer, the Company announced that it is selling its Egyptian assets and I am pleased to say that the process remains firmly on track and the disposal, if completed, would constitute a fundamental change of business pursuant to AIM Rule 15, because the consideration, as currently calculated in the Heads of Terms, will significantly exceed the market cap Consideration Test threshold. The disposal will allow the Company to address some of the legacy issues inherited from the past and allow the Company to develop its organic and inorganic growth story in Morocco and beyond.
Finance
During the first half of 2023, the Company negotiated a syndicated convertible loan agreement for up to $3.25 million, which was signed after the end of the six months period, in July 2023. To date, $2.5 million has been drawn for the purposes of reducing outstanding debt to the European Bank for Reconstruction and Development (EBRD), the Moroccan drilling campaign and for general corporate purposes.
Subsequent to the period end, in September 2023, the Company entered into a non-binding heads of terms with DIKA MOROCCO AFRICA, its largest offtaker and a 100%-owned subsidiary of Citic Dicastal, which is a subsidiary of Citic Group, a Chinese holding company with a corporate portfolio approaching $1 trillion, to prepay for SDX's gas deliveries in Morocco. The initial terms of the agreement envisage the receipt of approximately $2 million by the end of September 2023. These funds are planned to be used towards the drilling costs of the KSR-21 well and for general corporate purposes. A further heads of terms for a larger prepayment amount is currently under negotiation and is expected to be agreed and funds drawn by early 2024. The Company plans to direct this second prepayment towards funding a further multi-well back-to-back drilling programme. This type of back-to-back drilling, which allows development of gas behind pipe (booked reserves), further increases operational efficiency, reduces costs and ensures that immediate and future demand can be met.
Operations
In February 2022, the Company sold 33% of the shares in Sea Dragon Energy (Nile) B.V., the entity that holds its interests in the South Disouq concession, to Energy Flow Global Limited ("EFGL") for a consideration of $5.5 million. From 1 February 2022, the Company owned 67% of Sea Dragon Energy (Nile) B.V. with the remaining 33% held by EFGL as a non-controlling interest.
In February 2023, the Company and EFGL, at the request of EGAS, entered into agreement with EFGL to repurchase the 33% of the shares in Sea Dragon Energy (Nile) B.V. and signed a Deed of Assignment to assign 33% of its 55% interest (18.15% interest) in the South Disouq concession to EFGL. The consideration agreed represented 33% of the working capital of Sea Dragon Energy (Nile) B.V. as at February 2023. From February 2023, the Company owned 100% of Sea Dragon Energy (Nile) B.V., which owned a 36.85% interest in the South Disouq concession.
In South Disouq, Egypt, we undertook workover operations on SD-3X and SD-4X wells, recompleting the wells to shallower reservoirs to maximise recovery and on IY-2 to restart production.
In West Gharib, Eqypt, we continued with our workover operations on the existing wells to maximise recovery from this field.
Subsequent to the end of the period, in August 2023, we announced the signing of the heads of terms for the disposal of all the Company's Egyptian assets to a large multinational operator with existing Egyptian upstream interests. This strategic decision allows the Company to focus on the optimisation of its Moroccan portfolio, including the diversification into the transition energy sector.
In Morocco, we produced approximately 0.4 billion cubic feet (69,249 barrels of oil equivalent) during H1 2023. Gas and energy demand in general in the region remains high and, in June 2023, we renegotiated the gas sales agreement with one of our key customers and received a higher gas price for production with effect from 1 May 2023.
In September 2023, we commenced drilling the Ksiri-21 ("KSR-21") well in Sebou Central of the Gharb Basin, Morocco. The KSR-21 well has reached its total vertical depth of 1,955 metres (1,966 metres measured depth) targeting a prospect within the Hoot formation, which is one of the main producing formations in the area. Drilling and wireline logging data confirm the presence of gas charged sands within the targeted reservoir section. The reservoir interval will now be perforated to undergo a short testing period before being brought onto production to supply existing gas offtakers.
We thank all our stakeholders and shareholders for their support over the last period, as we work tirelessly to revitalise the business and deliver long-term sustainable value to shareholders. We would also like to express our condolences to all those affected by the devastating earthquake in Morocco earlier this month and continue to offer our support.
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Source: SDX Energy
