SDX Energy upbeat on progress in Morocco and Egypt

(Sharecast News) - Middle East and North Africa-focussed oil and gas company SDX Energy updated the market on its operations in Egypt and Morocco following recent drilling successes on Tuesday.
The AIM-traded firm said that in Egypt, as a result of the Sobhi discovery in South Disouq where SDX has a working interest of 55% and is operator, which it drilled at a 100% working interest, gross plateau production of around 50 million standard cubic feet per day was now expected to be maintained for a further 18 to 24 months until mid-2023.

It said there was potential for a further extension to mid-2026, depending on the results of planned future exploration drilling.

Management estimated that Sobhi-1 would generate around $25m of undiscounted post-tax cash flow after capex to SDX, equivalent to $1.04 per million cubic feet.

The company explained that, after integrating the results of the successful Sobhi well with the remapped 3D seismic over the South Disouq concession, it estimated that incremental prospective resources of around 100 billion cubic feet had been identified and de-risked across five prospects.

About 25% of that incremental prospectivity was identified in a new Buried Hill play concept, which was productive in a neighbouring field 10 kilometres to the east.

Management said it estimated that those follow-on prospects were expected to have similar costs and post-tax cash flow profiles to Sobhi.

Eight to 10 wells were planned in the West Gharib concession, where SDX has a working interest of 50%, between 2021 and 2023, for a gross cost of between $8m and $10m, with the potential to increase gross production from 3,200 to 3,300 barrels per day to around 4,000 barrels per day by 2022.

After taking account of drilling and other infrastructure tie-in capital expenditure, the incremental production at West Gharib was expected to generate around $5m to $6m in low-risk, undiscounted post-tax cash flow, net to SDX.

In Morocco, SDX said post-drill analysis of the LMS-2 well at Lalla Mimouna, where SDX has a working interest of 75% and is the operator, had identified similarities with the LAM-1 discovery made by the previous operator of the concession, which flowed gas and condensate in 2015.

Subject to successful testing, it estimated that LMS-2 could contain around 1.5 billion cubic feet, and had the potential to de-risk a further six billion cubic feet in separate compartments within the same feature.

Management also estimated that a further 3.4 billion cubic feet of close by prospective resources would be de-risked if LMS-2 tested successfully, increasing the overall prospective resource potential to 10.9 billion cubic feet.

LMS-2 would be tested after the Covid-19 restrictions in Morocco enabled perforation and testing crews to re-enter the country, which it hoped would be late in the third or early in the fourth quarter.

In addition to the 10.9 billion cubic feet of prospective resources that could be de-risked by LMS-2, management said it had identified a further 25.5 billion cubic feet of prospective resources in multiple prospects across the concession.

"After analysing the results of the recent drilling successes in Egypt and Morocco, we are very excited about the future prospectivity identified from the Sobhi well in Egypt and from LMS-2 in Morocco," said chief executive officer Mark Reid.

"With Sobhi, we expect to extend our gross 50 million standard cubic feet per day plateau production by 18-24 months to 2023 and, with some follow on drilling success, this could be extended further into 2026.

"Sobhi has also helped us identify approximately 100 billion cubic feet of follow on, de-risked, incremental prospectivity in the South Disouq concession."

Reid said that in Morocco, a successful test in LMS-2 could create 1.5 billion cubic feet of 2P reserves, and simultaneously de-risk six billion cubic feet of prospectivity in the same structure, and a further 3.4 billion cubic feet nearby, enabling the firm to then investigate low cost, early monetisation options.

"In addition, a successful LMS-2 test will help us better understand an additional 25.5 billion cubic feet of prospectivity in multiple prospects identified across the broader Lalla Mimouna concession.

"Finally, we are also looking forward to commencing our drilling campaign in West Gharib next year where we will be aiming to increase production in the Meseda and Rabul fields to approximately gross 4,000 barrels per day by 2022."

At 1551 BST, shares in SDX Energy were up 1.74% at 19.33p.