Member Info for Southmead

Very good trading volumes today and the SP finished in the blue.
Over 3million shares traded and some big trades at that.
Nice to see some interest and action.
Any theories?

Yes, I see that David Newland bought an initial 2million or so shares in 2017.
He would have paid between 45-60p per share for those and presumably is sitting on a big book loss at the moment.
The good thing is that he sees upside potential in SDX and now is the moment to average down.
He has bought steadily over the last few months at sub 20p and doubled his holding.
He must now have an average price paid of around 35p I should imagine.

David Newlands also has a stake in Independent Oil and Gas who own the Thames Gas Pipeline.
It is good news that he obviously sees potential in SDX.
The question in my mind is where has he bought these from.
Clearly not the open market as such a big holding would take many months to accumulate.

Was SDX involved in this evaluation? I wonder.
https://energyegypt.net/dana-gas-sells-its-egypt-onshore-producing-assets-to-ipr-energy-for-236m/

Are RBC Dominion a new investor in SDX?

Well, if the SP can carry on gently rising like it is until the conference call, I will be very pleased.
Perhaps a little over 20p by next Wednesday. Lets hope so.

Spoil sport

If not an acquisition, what about a merger with a bigger business in trouble.
Just look at Chrysaor having a pop at Premier.
There are a few Egypt based businesses that come to mind.
Look at Pharos, United Oil and Transglobe, all with struggling share prices, hugely discounted valuations to asset value.
A merger with one of them might be a transformational opportunity for SDX.
Could we see an cleverly financed merger?

I am inclined to agree with you.
What else would they want to discuss or announce at this stage, with quarterly results just announced?
I just hope that it is an acquisition without an equity raise.

All investors would be dead set against an equity raise at these share prices for whatever reason. The SDX Board and their advisors are well aware of that fact and therefore any acquisition will, I am sure be evaluated on the basis of loan capital.
The SDX balance sheet and cash flow can support approximately $30M in my opinion on its own and the more perhaps secured on the target assets. No need for any equity at these prices. IMHO

I too like the accelerated drilling schedule. SDX has identified some 233bn cubic feet worth of new potential recoverable reserves in South Disouq. If proven through drilling, these reserves will transform the business valuation and provide great opportunities. Little wonder that the Board are anxious to accelerate the drilling programme to see.
As for inorganic growth through merger or acquisition, I do not share your view that an acquisition would be bad for SDX.
Any merger or acquisition would have to be evaluated on its merits, valuing existing assets and reserves and potential development opportunities. SDX has no net debt and a very positive forward cash flow. This puts SDX in a good position to take advantage of some of the distressed businesses that are around at present. The real attraction of an acquisition is the potential for a quantum shift in the fortunes of the company, at a stroke launching it into a bigger league. The share price would definitely react positively to that scenario in my opinion.

https://www.proactiveinvestors.co.uk/companies/news/930640/sdx-energy-continues-to-perform-strongly-with-production-ahead-of-guidance-930640.html

A decent share Volume today of 843K.
That makes a pleasant change and serves to show that there is some interest in this share.
Although the SP finished down on the day 300K shares were bought in the last half hour.

Personally, I am very encouraged by Mark Reid's comments in this RNS and the 9 month results.
SDX have come through a tough year since the departure of PW and the company has managed to re-established stability of performance and trust in their statements and forecasts. I say well done.
Drilling success during 2019/2020 has provided some very exciting organic growth possibilities for SDX and I am looking forward to the investment interest that these opportunities will create in SDX shares.
Meanwhile, with the bulk of capex out of the way for 2020, cash will be rolling in at a significant rate over the next few months. I can understand others estimating a year end bank balance in excess of $20M.
I will do a few sums later on. Well done SDX

I understand the frustration that some shareholders feel when management bonus payments are announced during a period of poor share price performance.
Today's RNS relates to bonus payments for 2019 financial year. The bonus scheme appears to have been paid out at a level of 30% of it's total value. In other words, 70% of the bonus has not been paid.
Management could have taken their bonus payments back in March, but because of Covid lockdown and the uncertainty, payment was postponed until now. Further, the payment could have been taken all in cash, but management has accepted partial payment in ordinary shares instead.
These are good points for the Management Team. They were only awarded 30%, they postponed it six months, and they took most of the payment in shares not cash.
I consider that this demonstrates an encouraging degree of faith and optimism in the Company and the opportunity that exists in the current Share Price. Well done Mark and his Team.

The really good stuff was in the announcement of the Company's long-term incentive plan.
That incentive scheme aligns Mark and his team with shareholders interests. Not just bonus for profit performance, but bonus for increasing the share price. 50% of their LTIP is based on the increase in Share Price. Now that has got to be a good thing for shareholders surely???

Now that the anchor 60-day volume weighted average price of a share on 11 September 2020 (£0.1696 per share, has been set maybe Mark and Nick will have every reason to want to see the SP rise!!!

In my opinion, no one is going to buy SDX against the wishes of the major shareholders, Waha and Snyder.
They hold about 40% between them and throw in Mercantile and Mr Monoyios and his wife and you have a proverbial brick wall against any unwanted approach.

I totally agree with you smallholding, a relatively small program of share purchases would have a dramatic effect on the SP. Right now would be a great time to start from a value for money perspective. Shares could be bought by the Company and cancelled, which in theory would increase the SP of the remaining shares. Just imagine what a 1/2 Million shares a month program might do for the share price? Then, when the SP is high enough, issue new equity to recoup the cash. IMHO :)

SDX can use its assets to borrow money.
Put simply, as at June 2020 SDX has a producing assets base of about $100M and virtually zero borrowings.
The cashflow statement shows that these assets are currently generating approx $1m per month with limited CAPEX going forward.
It would be perfectly feasible to raise up to $50M in loans based on these assets and SDX's ability to pay interest on the loan.
The loan would be covered twice and secured on the assets.
The $50M loan could be used to finance the acquisition of further assets, provided that the investment case stacked up and showed good returns. As a sweetener, to negotiate good terms on the loan, a convertible equity option may well be introduced. This scenario is a baseline position, clever financiers like Waha I am sure, could think up imaginative ways to secure even greater amounts than $50M, based on the SDX balance sheet plus the acquisition target's assets.
This method of raising acquisition finance is much more beneficial to existing shareholders than an issue of share capital.
IMHO, SDX are in a fantastic position to make a big acquisition if they are able to get the opportunity.

I agree with your overall view that SDX will and must make an acquisition soon.
There are plenty of distressed businesses out there to choose from and SDX is in a great position.
However, I don't think that more shares in SDX is going to interest Waha or Ingalls very much.
Their investment already has a poor performance record and they will not wish to invest further, even if it dilutes their average. Acquisitions will be financed by gearing up existing and acquired assets and Waha and Ingalls will be able to assist in that. They are well connected in the ME and will be able to help attract investment loans. These acquisition loans may well have equity conversion rights attached to them in addition to a tasty interest rate.