The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
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It seems SDX have discussions with potential customers on a semi regular basis but apparently most of them never want enough gas to make it worthwhile for them (whatever worthwhile means to SDX).
Thanks, I stand corrected. Good to get another one at last but as you say the AFZ may produce more customers eventually but you would assume they have approached everyone already there.
Citic Dicastal Co. That was the Chinese company. Auto-parts maker.
But yes, can't see any more demand coming in. The guy who recently had to declare a spreadbet here (David Newlands) was on the Capital Markets call and said this (paraphrasing);
"Find more gas in Morocco is all well and good, but where is new demand going to come from."
Mark Reid waffled on and basically there is nothing even close to concrete in terms of new demand. The Morocco business just isn't like that. There is spare capacity in the AFZ for more businesses. If they come they may want gas but it has to be of sufficient volumes to make it worthwhile for SDX. So basically, don't expect SDX gas demand in Morocco to increase further than that 9th customer any time soon.
Citic (or whatever they are called). Chinese company I think and current customer. They are commissioning a new factory in AFZ and already drawing gas I think. SDX expect it to add another US$2m/year in free cash flow I think. It's in the latest Capital Markets Day and also in the recent investor call.
From the latest presentation
"Currently eight customers use SDX’s sole supply of gas to AFZ."
The last new customer signed up February/March 2019.
Enlighten me who is the new customer in Morocco?
Well said Doubler, we are with you.
You can buy production or you can find it for yourself.. SDX are pretty good at finding it and have some excellent prospects. We have a new customer in Morocco and potentially more and at 90" of pre covid levels. F off and deramp another share.
Talk is cheap from any company and it is very easy to say we are screening business development opportunities, it costs nothing and possibly takes a bit of the heat off.
SDX need an acquisition to boost the business, no new customers in Morocco and income is capped from SD unless they increase capacity.
The big question now is how do they pay for one?
Clearly they are not generating enough cash to self fund as these results show, I would argue that getting a loan might prove difficult when even between drilling campaigns they aren't banking cash, that would mean the issue of equity if the two cornerstone investors can stomach it.
Do they really want to put more into an investment that has already seen their initial investment halved?
The cash they invest in drilling does not generate equal amounts in free cash flow. It generates multiples. There shouldn't be loads more CAPEX that doesn't generate a direct return (like the building and commissioning of the CPF) other than pipelines. Drilling and finding commercial resources does generate a return on investment.
https://twitter.com/sdxenergy/status/1329346238911754240
"Looking ahead #SDX is well-placed to weather the current global uncertainties and continues to screen a number of business development opportunities, as well as constantly assessing the optimum allocation of its capital."
Does that mean they are looking at business development in Morocco to monetise gas they can't sell as well as inorganic growth? Most likely nothing will come of either.