Highlights
- Completion of a large data reprocessing project that enables high grading of leads to prospects to target productive resources more accurately. This data reprocessing has increased SDX's confidence in the earlier-presented 47 Bcf gas play, of potentially significant value to the Company.
- SDX plans to drill a stratigraphic well in Q4 2024 which, if successful, will help to develop a drilling campaign for the 47 Bcf play in early 2025.
- The Company has identified its next two well targets, with total unrisked gas in place of over 3 Bcf with a view to commence drilling these in Q4 2024.
- SDX is in discussions with its partner, the Moroccan state, to tie-in a stranded gas well in the near-term, generating additional revenue for SDX. Existence of other stranded gas wells in the Rharb basin may give rise to a broader project to connect multiple wells, subject to agreement.
- SDX is preparing the tender process for the acquisition of a further 150 km2 of 3D seismic data - significantly increasing opportunities for more gas discoveries in the north west of the Company's Rharb basin licence.
- SDX has received two draft term sheets for structured financing, backed by future gas revenues, to fund the planned drilling campaign in Q4 2024.
- The Company is also in advanced negotiations with two multi-billion dollar international companies for a deeper partnership in accelerating SDX's gas exploration and production activities in Morocco.
Completion of 3D Seismic Merge and Reprocessing
SDX is pleased to announce the successful completion of the merging and reprocessing of more than 650 sq kms of 3D seismic data. In February 2024, SDX awarded the project to Absolute Imaging, based in Calgary, Alberta, Canada. Their task was to merge five contiguous legacy 3D seismic surveys into a single unified survey, with consistent processing parameters. The objectives of this intensive process were to enhance consistency across the surveys, improve structural resolution, identify new drilling opportunities, and de-risk previously identified prospects.
Initial reviews of the final data have confirmed that all the objectives have been achieved, providing greater confidence and resolution across all the surveys. The next phase will involve amplitude-versus-offset ("AVO") inversion analysis to increase the reliability of using direct hydrocarbon indicators ("DHIs") for identifying and de-risking leads and prospects within the merged seismic area. SDX expects to complete this process by the end of Q4 2024.
47 Bcf Clustered Amplitude Play Update
Recent reinterpretation of subsurface data, prior to merging and reprocessing of the data, identified multiple clusters of densely packed amplitude DHIs. Preliminary management estimates suggest that the largest cluster could contain mean recoverable unrisked resources of 47 Bcf. Pending successful evaluation, SDX plans to develop this new play type using multi-lateral drilling techniques, commonly employed in the North American market and which SDX's operational team has experience with.
At today's gas prices in Morocco, 47 Bcf of gas, once developed, would represent a significantly valuable asset to the Company and a significant multiple of current reserves. SDX sees large demand for gas from current and future industrial offtakers in country and is encouraged by the discussions that have been held with potential funding partners to develop these opportunities.
With the newly merged and reprocessed seismic data, SDX has increased its confidence in this play and has identified an exploratory drilling location. This stratigraphic well will target multiple stacked anomalies to confirm the presence of both reservoir and gas. It will also test deeper stratigraphic leads, which, if successful, could unlock a new play type in the basin. SDX is preparing to initiate the mandatory Environmental Impact Assessment ("EIA") process, which is expected to be complete in early Q1 2025. Concurrently, the conclusion of the AVO analysis will allow the company to rapidly proceed towards full-field development of the clustered anomaly play in the first half of 2025.
Two New Drilling Locations
SDX has identified two new drilling locations and is in the final stages of securing land permits for each. The newly processed seismic data has been integrated into the original interpretations, further de-risking both prospects. These locations, designated as KSR-22 and OLME-A, have unrisked mean gas in place estimates of 2.4 Bcf and 0.6 Bcf, respectively. SDX plans to commence its next drilling campaign during Q4 2024.
Near-Term Production Opportunity
The Company is waiting for the approval from Office National des Hydrocarbures et des Mines ("ONHYM") to tie-in an existing ONHYM-owned well to the Company's pipeline, which would bring proven gas reserves online in the near term. SDX would share the gas sales revenue with ONHYM. This would help maintain supply of gas to customers and bring additional revenue to SDX, while the Company focuses on progressing its drilling campaign, identifying new opportunities, and developing the 47 Bcf clustered amplitude anomaly play. Other currently stranded wells with gas-behind-pipe may also be tied into the Company's pipeline, subject to further negotiations with ONHYM.
Temporary Reduction of Gas Supply to CITIC Dicastal Subsidiaries
The Company has directed CITIC Dicastal subsidiaries, including DIKA MOROCCO AFRICA ("DMA") to temporarily reduce their gas consumption from 48,000 cubic metres per day average during August 2024 to 10,000 cubic metres per day, as part of a proactive effort to responsibly manage remaining resources and to ensure maximum recovery from the field. The Company remains committed to supplying gas at existing consumption volumes to other offtakers. Plans are in place to restore historical supply levels to DMA as soon as new gas reserves are assessed, either by connecting ONHYM's legacy wells with identified pay zones or by drilling new wells.
Tendering for 150 km2 of New 3D Seismic Data Acquisition
SDX is preparing a tender process to select a partner for the acquisition of over 150 km2 of 3D seismic data. The area selected for this new seismic acquisition campaign is to the north-west of the existing newly merged seismic surveys and has been strategically placed to allow SDX to tie-in to its existing pipeline infrastructure, merge into the newly merged data set while covering a thicker and prospective portion of the basin. SDX anticipates finalising the tender and commencing the seismic acquisition in Q1 2025. The EIA for this project commenced in July and is expected to be completed during Q4 2024.
Progress on Structured Financing Arrangements and Strategic Partnership Discussions
SDX has been in negotiations with two separate counterparties to secure financing, secured by SDX's future gas revenues. SDX has draft term sheets from both counterparties and the Company hopes to be able to finalise a transaction in Q4 2024. This structured financing will be used to fund the upcoming drilling of the new production well KSR-22 and potentially the stratigraphic well, to significantly de-risk the 47 Bcf play.
A separate tranche of financing is being negotiated for the tie-in of the ONHYM well, referred to above and should be in place also in Q4 2024.
SDX also continues to explore strategic partnership options with two multi-billion dollar international companies to provide financing support in the short-term, enabling SDX to drill an additional well within six months and acquire the new 3D seismic data. In the longer-term, such a strategic partnership may significantly accelerate and expand SDX's exploration and production activities in Morocco.
As the sole independent gas producer in Morocco, SDX works closely with its partner, ONHYM, in all aspects of development and production. SDX's gas is sold to multiple offtakers in the Kenitra industrial area.
Source: SDX Energy
