SDX Energy Share News (SDX)

(Sharecast News) - Middle East and North Africa-focussed oil and gas company SDX Energy updated the market on well-testing operations at the SD-12X discovery well in the South Disouq Exploration Permit, onshore Nile Delta, Egypt on Friday.

The AIM-traded firm said the drill stem test at the Sobhi well began with a step-rate test of one hour, achieving a maximum rate of 25 million standard cubic feet per day on a 54/64-inch choke.

It said that the initial flow test was followed by a three hour period flowing at a stable rate of 15 million standard cubic feet per day on a 28/64-inch choke, and then a further four hours flowing at a stable rate of 10 million standard cubic feet per day on a 16/64-inch choke.

The well was then shut in for a 12 hour build-up period, during which pressure continued to increase back to pre-test levels.

SDX said that from an initial review of the well-test data, it expected that when connected, the well would produce at an optimum stabilised rate of between 10 million and 12 million standard cubic feet per day, which was in line with the nearby Ibn Yunus-1X producing well.

The Sobhi well was expected to produce mostly dry gas, as opposed to gas and condensate.

Sobhi would be subject to a longer rig-less test in the coming weeks, which the company said would provide more data to help determine the recoverable volume in the discovery, which management currently estimated to be 24 billion cubic feet of recoverable resource.

The exact timing of the rig-less test would be dependent on the timing of the mobilisation of equipment, which could be impacted by ongoing Covid-19 restrictions in the region.

Management said it expected the Sobhi well would be tied-in during 2021, via a 5.8 kilometre tie-in to the Ibn Yunus-1X location, where an existing flow-line connects to the South Disouq Central Processing Facility.

On a gross basis, the tie-in cost was estimated at $3.5m.

The discovery would potentially only require one further development well to be drilled, which would not be necessary for another two to three years.

SDX said it drilled the Sobhi well at a 100% working interest, with the total cost of the well - including the cost to complete - estimated at $3.7m.

Under clause 8.5 of the joint operating agreement, 'Premium to Participate in Exclusive Operations', if the company's partner chooses participate in the well now that a discovery had been made, it would be required to pay its full 45% share of the well cost plus a premium of a further 300% of that amount.

"We are pleased with these initial well test results which confirms that we have a commercial discovery at the Sobhi well," said chief executive officer Mark Reid.

"This discovery increases our South Disouq 2P reserves by approximately 50% given that we solely risked the well."

Reid said that Sobhi had the potential to extend the current South Disouq plateau production of 50 million standard cubic feet equivalent per day through to 2023-2024, with a low-cost tie-in to SDX's existing gas processing plant.

"To have a commercial gas discovery of this scale at South Disouq is especially pleasing in the current environment as our low cost, fixed price gas development will continue to be highly cash generative for longer."

At 0918 BST, shares in SDX Energy were up 6.56% at 16.25p.