SDX Energy makes solid development progress as it swings to loss

(Sharecast News) - North Africa-focussed oil and gas company SDX Energy reported net revenues of $25m (£20.62m) in its first half on Thursday - a year-on-year improvement of 4% - with higher production reportedly compensating for lower net realised average oil and service fees of $57 per barrel of oil equivalent, down from $62 per barrel in the first half of 2018.
The AIM-traded firm said its netback of $18m for the six months ended 30 June was lower than the $19m achieved in the same period last year, primarily because of increased workover opex activity in the period, and a greater allocation of costs to opex.

It said those costs were allocated to capex and drilling campaigns in Morocco and NW Gemsa in the half-year.

Operating cash flow before capex remained "robust", the board said, at $13m.

That was down from $20m year-on-year, which was apparently higher as a result of the unwinding of a larger Egyptian Petroleum Company debtor in the period.

Its operating cash flow in the first half supported $19m of capex invested - down from $22m.

Of that $19m, SDX said $12m was related to the South Disouq CPF, pipeline and well tie-ins and 3D seismic, with $3m spent on customer connections and 3D seismic in Morocco, $3m for workovers in Meseda and North West Gemsa, and $1m for drilling and completion costs at South Ramadan.

The company said its drilling and development activities were fully funded from expected future cash flows and its existing sources of liquidity.

Its total comprehensive loss for the six months ended 30 June was $0.4m, swinging from income of $1m a year prior, while cash at period end fell to $11m from $25.2m year-on-year, with the board confirming the $10m EBRD facility remained undrawn.

"The company continues to make good progress toward achieving its three medium-term strategic objectives of securing first gas at South Disouq in the fourth quarter, executing an efficient and successful 12-well drilling campaign in Morocco in 2019-2020, and continuing with our potential exploration drilling campaign in South Disouq in 2020," said SDX Energy chief financial officer and interim chief executive officer Mark Reid.

"Production and capex from our operations remains within our guided ranges and we look forward to updating the market on the results of our drilling activities in Meseda and Morocco in the coming months."

Reid said the firm's cash flow generation, liquidity position, and balance sheet remained "strong", and continued to provide the company with the necessary funding to complete all of its medium-term strategic objectives.

"Achieving first gas at South Disouq in the fourth quarter will be transformative for the company, as we will benefit from our 55% share of the expected production plateau of 50 standard cubic feet per day from the first quarter of 2020."