focusIR May 2024 Investor Webinar: Blue Whale, Kavango, Taseko Mines & CQS Natural Resources. Catch up with the webinar here.
I've add another 6k today at 63, think that will look cheap in 6-12 months time. With SD gas production commencing shortly and a 50% increase in gas sales in morocco at the higher rate of $12 they'll be generating serious cash H2 2018. Looks to be plenty more running room in both SD and Morocco license areas, then there's the prospect of an acquisition which looks very likely as it's frequently mentioned in podcasts and also within the presentation. IMO
With expected first gas sales from SD in H2 2018 and anticipated Flow Rates of 50-100 MMscfd (8.3-16.6k BOE/D) SDX will be generating serious cash from this asset. If we can agree a price of $4/MMscfd that should generate additional revenue of c$22.5m - $45m.
http://egyptoil-gas.com/news/petroleum-minister-40-price-increase-for-dea-extracted-gas/ An article from 2015 confirming Egyptian authorities agreement to increase gas price from $2.5 to $3.5. Deal seems to be linked to ramping up production. PW has had 12 months to degotiate a deal and I think the commitment to 4/5 wells suggest SDX want to ramp up production from SD to over 100mmcfd, which might be part of a deal for higher gas prices? Personally I think $4 is a done deal, IMO.
The rig contract is for four firm wells and one contingent well, as the COS has increased for the remaining wells I think they'll instruct the fifth well. With potentially five producing wells I would hope we'd be closer to 100mmcfd exit rate in 2018. I think that's close to $30m p.a. net to SDX @ $2.65 price and after deducting tax @ 32.5%.
The March presentation page 19 states "Potential exists for Kelvin and South Disouq to become one large structure. Appear to have a continuous gas bearing section connecting them" Are they looking to prove up this concept by bringing forward the Kelvin drill? SDX believes that total volume potential could exceed 2.5 TCF (unrisked) so early advancement of this concept would be massive. Suggests to me that they feel confident they've already got enough coming on stream to hit year end targets, to change the schedule like that
13:36 into the podcast PW states $30m in the bank (assume to cover the wells) with $4m pcm free cash flow. This seems to reflect the last set of accounts with $39.17m revenue and $32.82 PBT, c$3m pcm, with the further upside in production already realised taking us to the current c$4m pcm figure.
So we're currently generating $4m a month free cash flow at current production rate of c3,500boe/d. If when we ramp production up to the end of year target of 8,000boe/d we could be looking at c$9m a month free cash flow!
SDX estimated that they had 12.62 BCF of un-risked potential volumes over 9 targets they'd previously mapped on the 3D seismic. LNB-1 estimate of un-risked mid-case volume of 10.2 Bscf of conventional natural gas and 55 thousand barrels of condensate has nearly delivered that on its own. Project 24 very much on track.