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On Friday 9th August, the trading day before the 1st discovery was made the share price was 68p. Whilst some optimism may have been in that share price, surely after two discoveries the current price is oversold. Especially with Carapa ongoing and so many other targets to drill

The SDX forecast timeline gave first gas w/c Sunday 10th November 2019 but this does include 8 weeks contingency.
We haven’t had a lot of information but the last update said “The installation and hook-up of the CPF is scheduled to commence later in August”.
The original timeline had “Hook up & Installation Wed 14th August to 11th September 2019”.
This suggests that they had used about 2 weeks of the contingency. Assuming they have had no further delays then SD could potentially go live 6 weeks earlier than the original forecast. That would make it around the first week in October 2019.
Obviously if they have encountered other delays it may come as predicted mid November, time will tell.

Following the Jethro discovery and the presentation showing that Hammerhead clearly extends into the Orinduik block, I wrote to Tullow as the operator to ask how they intended to proceed regarding this matter. After a long delay I received a reply yesterday, the relevant part was as follows
"We updated all prospect polygons in our map for last week’s announcement so decided to show the portion of Hammerhead that we believe falls into our licence which we can see on seismic. We don’t intend to drill in this section, but at a later date when Exxon may develop Hammerhead, it is likely we’ll need to discuss some simple unitisation in order to recover a % share that falls within our block. This in not unusual as often discoveries cross over licence boundaries."
Probably what most expected but it shows that all the partners in Orinduik will see a financial benefit from the Hammerhead discovery, what we don't know for certain yet is the extent of the overlap.

A question put to Neill on his Twitter account. I'm not sure if you are ablev to say, but if you are, have VRS had any interactions with Samsung regarding batteries?
His response was “not directly”.
Neill could have replied with a straight NO but he didn’t.
By replying “not directly” is he implying that they have indirectly by perhaps supplying graphene to a battery manufacturer that in turn supplies Samsung?

https://www.techradar.com/news/new-samsung-phone-battery-tech-could-be-a-huge-boost-to-galaxy-s12

Just saying on the July 24th presentation slides Hammerhead is outside Ordinuik, slide 26
https://www.tullowoil.com/Media/docs/default-source/3_investors/tullow-oil-plc_2019-half-year-results-presentation-final.pdf?sfvrsn=4

From the Tullow presentation this morning slide 4
https://www.tullowoil.com/Media/docs/default-source/3_investors/tullow-oil-plc_jethro-1-well-result-presentation.pdf?sfvrsn=0
Hammerhead clearly overlaps into Ordinuik, I thought this might get more attention

If you look at the number of trades in July 2019 from the london stock exchange website there were 2,000 trades, more than twice the total for any of the past 12 months. If you then look at the value traded for July 2019, 750m. That is three times higher than any total in the last 12 months.
I am firmly in the camp that ARC is being traded heavily at the moment. With the potential to rise quickly and a steady regular news fow it fits the traders criteria.

I think the concensus is that traders who bought on a delayed trade are now closing their positions on news. Given the share price has doubled in a month that sounds plausible. If that is the case, once these are cleared we should resume the climb

In Q3 2018 SDX generated US$12m netback, of that $3m was generated by Morocco.

Whilst the Brent price is currently around US$54 a barrel, SDX are still enjoying $63 boe on their Morocco gas. This is on 5 year fixed price contracts so that revenue is constant for the length of the contracts.

This is a double edged sword because if the oil price rises to $100 a barrel the income remains the same but more significantly in volatile times with a very low oil price SDX still receive the same revenue from Morocco.

The same can be said for South Disouq when it eventually comes online. We already know their plateau rate is 50MMscfd and the basic gas price has been agreed at US$2,65/mcf (PW said that the gas may be of a higher quality and achieve US$2.85/mcf but taking the lower figure)

50MMscfd. 50,000,000 divided by 1,000 x $2.65 = revenue of $132,500 a day
$132,500 x 30 days in a month = revenue of $3,975,000 a month
SDX have a 55% working interest in South Disouq, $3,975,000 x 55% = gross revenue of $2,186,250 for SDX a month.
It is reasonable to assume the gas price once agreed will be on a contract for at least 12 months, so SDX should generate at least $2m a month, or $6m a quarter, from SD in 2019, once connected.

Whilst some oil/gas companies have all their revenue linked directly to the oil price, SDX is in a far better position and crucially carries less risk, this fixed income gives the company stability when oil/gas prices may be changing rapidly.
With South Disouq producing 50MMscfd a day and assuming Morocco maintains the same production as Q3, then $6m from SD and $3m from Morocco will give US$9m a quarter of regular gross fixed revenue.

Harts
Let me start by saying I am heavily invested in SDX, like many I am currently underwater with my investment. For the past 18 months I have been very bullish on SDX, mainly due to the fundamentals and I have added to my holding this year, averaging down.
I want SDX to do well and provide us all with a healthy profit.

I also accept that over the last two months there has been panic in the global markets with overdone selling across the board. What concerns me is that for the first 10 months of 2018 when markets and the oil price were rising, it had no effect on the SDX share price

You say "but to say that this year hasn't been successful is unfair"

To answer that lets look at the facts

1. SDX started 2018 with a share price of 55.5p and ended it with a share price of 35.5p, a fall of 36%
2. The cash position at the end of 2017 was US$25.8m, it rose to $29.3m in Q1, fell to $25.2m in Q2 and fell again in Q3 to $18.7m. After 9 months, despite a steady rise in revenues, the cash in the bank has fallen by $7.1m. As things stand they are spending more than they are earning. For a successful business with growing revenues that is the opposite of what I would expect. I have no problem with spending spare revenues on exploration but don’t spend more than the company is generating.
Obviously I don’t know the cash position at the year end but I would hope it has recovered slightly.
3. I listen to every interview and podcast and PW has constantly said that SDX will exit 2018 producing 8,000 boe/d, not we might or we hope to but we will. At the eleventh hour he said they couldn't achieve this, damaging his credibility.
4. South Disouq was not connected to the grid because a vital document, the Development Lease had not been signed by the Egyptian authorities. On the latest interview PW told Malcy that they expected to have it signed by the year end. Has it been signed? We have no idea.
5 Earlier in the year PW told a presentation “we are cheap” and following that the share price fell to lows not seen since January 2017. During the course of 2018 how many shares in SDX did PW buy? None
I appreciate there are strict rules about when Directors can buy but I don’t believe that in an entire year there hasn’t been a time when he could have made a purchase.

In 2018 investors were reluctant to buy shares in SDX, I put that down to caution with potential investors waiting to see if PW delivered on his undertaking to turn success with the drill in 2017 into producing assets in 2018.
Well he failed and I don’t see that as a successful year.

In 2019 it could all change but South Disouq is crucial, all the exploration plans for 2019 were made assuming that the $2m a month that SD will generate would be starting now. With the delay the drilling has been put back until H2 to ensure they can afford to pay for it.

Southmead
You are correct that the exercise price is indeed £0.45 for each CSOP Option but that only relates to the 66,666 options granted to both Directors. These are clearly shown on the RNS that you refer to as "options" in column (4) the column (3) that I am referring to is " Number of common shares subject to the LTIP award"
The grants equate to 100% of each of the Executive Directors salaries on 31st July 2017. To calculate the number of shares granted under the award, the Directors salary is divided by the share price taken as £0.45p.

The 11% and 20% are thresholds at which the award is increased. If the growth in the three year period is less than 11% there will be no increase in the award but the original award will still stand.

An "award" is given, an "option" denotes a choice.

If the laid down criteria, whatever those are, are not met, then the shares won't be awarded.
However if the criteria is met then those shares will be awarded to each Director

Anyone wondering why our Directors are not buying shares at this low level may want to look at the Long Term Incentive Plan (LTIP) introduced 31 July 2017.
Under this scheme Paul Welch was awarded 770,500 shares in 2017 and 732,337 shares in March 2018. Mark Reid was awarded 555,555 shares in 2017 and 561,798 shares in March 2018.
These are not options that can only be exercised at a predetermined price, these are awards that only have to be held for 5 years. There are “stretching strategic, operational, financial and shareholder performance criteria that must be met for the LTIP’s to vest” but I can’t find out exactly what they are. As shareholders we have seen the share price drop 36% this year and South Disouq was not delivered as promised. Whilst we have suffered financially they have seen a bonus equivalent to 100% of there salaries. Why don’t the directors buy shares? They don’t have to.
This LTIP is voted in every AGM and I for one intend voting against it. A purely share priced based bonus scheme would surely better focus the minds of PW and MR.

I have posted on ii and advfn regarding this scheme because whilst shareholders are suffering, they are getting a handsome bonus scheme that appears to reward failure. 2018 was not a good year for SDX shareholders. Forget the last two months of the global sell off, the first ten months of the year when the oil price was rising this share was still unloved

I have tried to establish what has happened to the R&M holding in light of the TR-1. Having written to SDX on six occasions in the past and only ever getting an automated out of office reply, I decided not to bother with them.

It appeared to be the Edison Broker Note that caused the confusion so I wrote to Edison asking if their figures were correct, if they were supplied by SDX and if not where do they get them from. I didn’t expect a reply but all credit to Edison they replied in two hours.

The figures shown on their broker note came from Bloomberg and not SDX; they acknowledged that sometimes they are a day or two out. They also asked why I was asking and if it was in relation to a specific holding. I replied outlining it was the R&M rise and fall that was confusing me after the TR-1. As yet I have not received a reply but if I get one I will update the board.

This poses the question, where do Bloomberg get their figures from and how accurate are they?

If R&M hold for numerous clients, some buying some selling them their total holding may rise and fall quite rapidly. Under AIM rule 17 "once their holding is three per cent or more, and changes thereto (movements through a percentage point upwards or downwards).", so in theory every time their total holding rises or falls by 1% they should notify the company.
However, this may be impractical if there is frequent trading.

As I read it, as there holding rose to 4%, 5%, 6% and 7% they should have notified SDX. Then on the way down it would be reported in 1% increments, unless they are given an exemption from this rule and only submit their actual holding once a quarter or every half year.

No definitive answer I’m afraid but at least we know where the Edison figures came from. I have searched the internet trying to find a Bloomberg page that shows the significant holders of SDX shares without success but I don’t have a Bloomberg account. This sort of info may only be provided to clients.

I do find these TR1 forms confusing why not have two boxes, one for acquisitions and one for disposals.
With just one box "An acquisition or disposal of voting rights" it is not always clear if they have increased or decreased their holding.

I agree that you would expect the "Position of previous notification" to show either 3.42% or 7.2%

Clearly they have notified the company that they held 3.42% in the first case.

SDX not regularly updating their website does not help

As previously discussed the SDX website shows River & Mercantile Asset Management holding 3.42% on the 28th March 2018.

The Edison Broker Note dated 3rd July 2018 shows River & Mercantile Asset Management holding 7.2%

Today's TR1 shows them holding 10,796,703 shares

If the Edison figure is correct, and it should be, River & Mercantile Asset Management did hold about 14.7m shares in July 2018.

That would mean they have sold about 4m shares over this two month period and if that is correct it would explain why the share price has been stuck around this figure for some time.

Any thoughts

Continued
Risks – I see the main risks as a change of Government in either Egypt or Morocco, potentially altering tax or operating terms or a global financial crisis. Perversely in a global financial crisis you could argue that SDX could be seen as a safe haven. With so many companies promising ‘jam tomorrow’ and generating little or no income, a company like SDX generating cash, no debt, assets growing and capable of still making a profit down to a very low oil price, SDX might be seen as a much safer investment. I certainly consider it the least risky share I currently hold on AIM.

There is a lot of news to come before the year end, two big items of news will be the CPR and when South Disouq is connected to the grid, they could both potentially come in early December and either or both could be the catalyst for a share price re rating.

If a re rating does not come and SDX exit 2018 producing in excess of 8,000 boepd, then a date for the diary is May 19th 2019, when the 2019 Q1 Financial and Operating results should be released. This will be the first time the increased revenue from the doubled production hits the bottom line, if that doesn’t get a re rating with SDX generating circa US$100 revenue a year, then SDX will have become a takeover target itself.
I’m sure this isn’t something that is lost on PW, they want to sell at some point in the future but he won’t want to lose it at a fraction of it’s true worth.

AIMO

PW has stated that the company strategy is not to pay dividends but to put the revenue back into the ground to grow the company. At some point in the future, possibly up to five years, the company will be sold and all shareholders will hopefully make a substantial profit.
In an interview with Malcy PW said that the target was 25,000 to 30,000 boepd but the Edison Broker Note states “Longer term, management has an ambition to grow output to c30-40 boepd through a combination of organic investment and asset consolidation with the company’s core geographies (North Africa).” PW also told Malcy that they would not consider selling until the company has a value in excess of US$1 billion.

There is nothing wrong with that strategy and I believe most LTH’s accept that. The dynamic we are seeing now appears to be shorter term investors who either accept the long term strategy or are not aware of it. They have looked at the fundamentals and bought because the company is undervalued, they expected a re rate to make a quick profit and get out. Unfortunately a re rate has yet to happen and some are becoming disillusioned with the share and moving elsewhere, as some have alluded to on here recently. In addition, potential new investors look at the fundamentals and the recent share price history and using the old adage “If it looks too good to be true it probably is”, they wrongly assume that there must be something wrong here.

At the end of 2018 I see SDX reaching a very significant moment in the company’s growth. All new companies require a lot of cash and it takes a while before they reach the point where they are generating enough profit to justify a dividend. Where it not for the company strategy, SDX would almost certainly pay a dividend in 2019. This year they will have spent virtually all the revenue they have generated but next year, even with the planned drilling of 18 wells, they will still generate more cash than they spend. With no dividends to pay they will accumulate cash quite rapidly and that process will accelerate as new wells come online. Even doing as much exploration as they have planned, they have two options, firstly to keep building an ever increasing cash pile or secondly they use the cash to make acquisitions as opportunities arise.
Significantly for investors SDX will very quickly reach a point where they can self fund expansion from generated revenues. At that point the number of shares in issue will reach a plateau, apart from new options etc for employees. With a strategy of eventually selling the company, surely PW and the Directors will want as few slices as possible when the pie is finally divided up.

When new investors see a growing company, generating ever increasing cash and with an almost finite number of shares in issue, I expect SDX to be seen as an attractive investment, if it isn’t already.

Risks – I see the main risks as a change of Government in either Egypt or Morocco, potentially altering tax or ope

Just to add to the mix, the Edison Broker Note dated 3rd Jul 2018

Https://www.edisoninvestmentresearch.com/?ACT=18&ID=21483&LANG=

On the last page of the report it has River & Mercantile Asset Management with a 7.2% holding up from the SDX website 3.42% (dated 29th March 2018)

Monoyios Nikolaos D with an unchanged 4.4%

AXA are shown as having 2.5%

The CAN figures do not have a date and the AXA holdings appear to be duplicated with 3 entries, the top 4.14% appears to be almost the sum of the bottom two entries for UK and Paris 2.54% and 1.61%

One would hope the Edison figures were correct at the time of printing