Member Info for Southmead

Thank you Jag11.
Like you and many others who stand so very close to this investment, I find the delay on SD very frustrating.
I am not a patient man by nature and have to keep reminding myself that we are only looking at a delay.
SDX have found the gas in SD and tested the wells with fantastic results. The next step will enable that gas to be sold and put money in the bank.
'What's not to like'? Well, when I think of all the major problems that some of my other oil E and P investments have encountered over the years, this irritating delay in approval of SD is one of the better problems to have.

Malbrad
You are entitled to your opinion about the Morocco assets but I think that you are missing the significant points about SDX overall and the South Disouq potential in particular. I think that the following summary gives a far more balanced assessment of SDX's value and prospects. It highlights the great potential of the drilling prospects in Egypt and the extremely strong financial position that SDX has achieved in the last quarter.

SDX
- Strong Q3 and 9 Month 2018 results
? Netback/gross profit of $33.2MM increased by US$10.9MM (53%) over 2017
? Cash generated from operations increased by $12.7MM (127%) over 2017
? Current entitlement production up by 655 boepd (20%) to 3,889 boepd
? Current (23/11/18) working interest production currently: 5,751 boepd
Well Funded
? US$33.2 MM of Working Capital (US$ 18.7 MM in Cash), no debt
? Generating +/-$3.5MM of cash flow/month
? Credit facility with EBRD in Morocco for US$10MM (undrawn)
Looking Ahead
- 2019 ? NW Gemsa ? 7 workovers (maintenance)
? 2019 guidance @ 4,100 boepd ? Meseda ? 3 development wells
– Meseda & Rabul ? 2019 @ 4,650 boepd
? South Disouq
? Start-up of production facility – 50 MMscfd (8.3kboepd)
? 2 exploration wells
? Complete Acquisition of 170 km2 of 3D seismic
? 2019 guidance @ 50 MMscfd (8.3kboepd) ?
Morocco
? 3 exploration wells
? Connect 3 additional new customers
? Full start-up of Peugeot plant – April 2019
? 2019 guidance @ 9-12 MMscfd
Planning to increase net production by > 5,000 boepd in 2019

What is not to like?

The TSX market finished up 3c at 76c with a strong finish.
Investors are looking positive over there.
Not on this board it seems, reading the foregoing moans.
Perhaps the TSX result will divert the moaners.

2019 will be an active year for SDX with H119 focused on delivery of first gas at South Disouq, ahead of a return to the drill bit in H219. An eight to nine well programme targets both oil and gas prospectivity in Egypt and appraisal/development locations in Morocco. Drilling activity is expected to be financed through cash flow, undrawn debt ($10m accessible under a reserve-based facility) and an estimated end-FY18 cash position of $15.9m. We expect first gas from South Disouq and increased gas production in Morocco to provide cash flow to support a FY19 capital programme of an estimated US$38m. Our updated risked valuation stands at 99.6p/share (up from 92.7p/share, driven by FX and roll forward of NAV), but we drop our sales and cash flow forecasts for FY19 – a key driver being deferred gas sales in Morocco and a later start-up at South Disouq. Morocco and South Disouq combined make up 67% of our core valuation with contracted sale volumes not levered to the oil price.

'A deal dies 3 times before it gets done' A quote from PW in a Malcy interview last month.

I suspect that the BP deal may have used up 2 of its lives so far as it got to an advanced stage last time and we may well hear of it again very soon, explaining the serious action on SDX shares since the New Year. Those in the know getting ahead I suspect IMHO.

Small-Holding
Thanks for sharing that piece of analysis.
$2M a month has been the projected worth of SD's new processing facility for some months now but it doesn't hurt to re-state it. This new revenue stream has only been postponed to H1 2019 and the intention is that it will be in place before the drilling campaign starts later on this year, to help funding.

The exercise price of each CSOP Option is £0.45 pence per share, being the closing mid-market price of a share on 28 July 2017.
Exercisable if:
If the share price growth in the three year period is less than 11% pa, there will be no increase in the base award number of shares set out above; and
· If the share price growth in the three year period is between a range of 11% pa and 20% pa, the additional number of shares which vest will increase proportionately within this range up to a cap of a multiple of one times the base award number of shares. This cap will be triggered at share price growth of 20% pa or more.

Smallholding you are completely wrong in your assertions.
You really ought to research your subjects better before weighing in with such heavy criticism.
Details of the 2017 Grant of awards under new long term incentive plan can be found in RNS 6976M issued on 01 August 2017.
I suggest that you read it and perhaps rectify your conclusions on this board and others.
You are in danger of making yourself look a fool so early in the New Year.

It is amazing how long this drill is taking and no news update on progress since PW said that it was some way off when he presented the Q3 results.

PW played it down big time.
A 'commitment well', which completes our obligation on the South Ramadan license. Don't expect anything to come of it.
BUT
Drilling, started on early 2018 and still goes on supposedly!!!!
The 26.2-sq km (10.1-sq mi) concession is in 27 m (88.6 ft) of water, between the 550-MMbbl Ramadan field, 5 km (3.1 mi) to the northwest, and the 1.5-Bbbl Morgan field, 6 km (3.7 mi) to the southeast. Both produce light oil from Lower Cretaceous Nubia sandstones.
South Ramadan contains two proven productive horizons in Eocene Thebes and Senonian Matulla carbonates.
SDX Energy is a 12.75% equity owner, with Pico holding 37.5% as operator and GPC the remaining 50%.This will be up-dip from one of the previous producing wells in the field.
Total cost of the work program this year will be around $23.5 million, including some platform remediation work and a well workover, both dependent on the success of the appraisal well.
PICO Cheiron owns a 37.25% stake in the South Ramadan Concession which is located in the southern province of the Gulf of Suez,
15 km northeast of the Ras Shukeir Field Base. The site includes two platforms and two production lines, with a terminal at Ras Gharib used to store crude oil.
Contingent resources at the South Ramadan concession are estimated at a total of 13.56 mmbbls.
The concession’s production sharing agreement stipulates a cost oil of 30% and a profit oil of 22%.

So it seems that there is quite a bit to shoot for in this well. 13.56 mmbbls estimated resources with no estimated COS but enough of a chance to warrant PICO paying out $23.5 million. SDX must be spending $3 million on this well. I think that we might be pleasantly surprised by the result here. :)

Hi Tigris72poo
That is well put, a nice clear explanation which draws the difficult distinction between the SP and the Intrinsic value of the share.
In SDX's case the Intrinsic Value of the share is closer to the Core NPV that is stated on the SDX website at approx. 95pps. Any new share issue at below that price would be a dilution to existing shareholders and for this reason I would expect PW to choose loan capital to fund an acquisition, if he can.

Dilution of shareholder value occurs when new shares are issued at a price lower than the prevailing share price.
Since the SDX SP is so grossly undervalued compared to the Core NAV which SDX itself quotes in the December 2018 Presentation, it could be argued that dilution would occur if new shares are issued at anything below $1.18 per share.(approx. 95p) For this reason, I think that it would be hard for PW to justify raising equity finance without a substantial premium to the existing SP. Loan finance would be a much better option for shareholders.

Anyway, the point is that PW has said many times, that he will only look at issuing new shares if he needs to to fund an acquisition. He has made it clear that existing cash flow is sufficient for existing capital expenditure plans. However, that doesn't stop an Institution from believing that they may get an opportunity to purchase shares cheaply later on and to sell now to both rebalance their portfolio and keep the SP low. All in MHO of course.

Why is one of the large institutional shareholders selling SDX at SP's ranging from 70p down to 40p?

It surely has to be that they are aware that PW is actively pursuing acquisitions and that he will probably come back to those same institutional shareholders for equity finance when he finds one.
The Institution knows that they will have another investment opportunity when the acquisition is made and therefore they dispose of a fair proportion of their existing shares in order to acquire more shares later on through equity issue.
This action will serve to manage their total investment exposure to SDX and create short term positive cash flow at a profit for the Institution.

This action steadily drives down the SP whilst making a profit becomes good business for the Institution but agony for the ordinary private investor.
All in my opinion of course, and I am not the first to suggest this, but it is the only common sense reason that I can come up with.

I've written this before but it is just as relevant today.....
'This SP movement is extremely painful to all SDX investors, I can assure you.
The continuous downward movement makes us question our trust and confidence that all is as it seems with the business. As a sanity check, we challenge our assumptions and question our judgement, we look for reassurance from research and reports, we look at this blog and we worry.

This is all very healthy and natural and if you are able to come through all of that and still maintain your faith that you have made the right decision and that you are in the right share, then you become a stronger investor. All in my opinion of course'

I agree Angela.
My AIM 'Small Oilers Watch List' is a sea of red today.
Most stocks down 3-6% off very low bases. Genel for instance, down 12.5%, Cairn down 10%,Premier down 11%.

SDX unchanged......good news.

Defensive stock in troubled times!!

PW said that future capital investment and organic growth, including the 2019 drilling programme, would be funded through production cash flow, without loan funding or equity dilution.
Great to hear that as it makes it very clear to me that the only reason SDX may go to the market for funding will be for an acquisition.
Hopefully that assurance will change the mindset of the seller or sellers that have been disposing of shares over the last few months

Why am I experiencing frozen share prices this morning on the Hargreaves Lansdown platform?

Being the saddo that I am, I have spent the several hours sifting through the enormous amount of information in the Q3 Interim Report.
One of the 'issues' that SDX faced last year operating in Egypt was the question of Egyptian Government payment and the weight of outstanding government debt on the SDX Balance Sheet.

I was surprised that there was no clear mention of this issue in the Report Highlights, as the current position looks to me to be an enormous improvement on last year!.

In Q3 2017 Egyptian Government Debt was $25.5M and this has been reduced to $19.4M this year, a reduction of 24% putting about $6M back in our bank. Even better when you consider that the average net realised oil price rose from $44.2/barrel to $63.69/barrel this year, an increase of 44%. That means the relative reduction in the Egyptian Gov debt was a 50% improvement on last year.
Egypt is becoming a much better place for SDX to operate, they are paying their bedts quicker.

Hi Mr B, I was just looking at that myself.
A decent rise on the day and SP was at $0.83 at one stage.
Will this be reflected on AIM tomorrow? Lets hope so.
Do I detect a reduction in the 'big sellers' volumes over the last 2 days?
Has he at last run out of shares to sell or has he called the bottom to the decline?
We wait and see.

If you wanted to top up, don't miss the boat!!

I suppose that when expectations are high from a superb set of drilling and discovery results, the delivery of actual results can disappoint. Especially during a period of consolidation when SDX are trying to build infrastructure and monetarise the drilling successes of 2017/8.
However, looking through the figures, I am reminded of an old trading adage, that 'Turnover is vanity and profits sanity'.
The business increased EBITDAX profits from $12,463,000 to $27,202,000 for the 9 months. A 118% increase and a big endorsement of managements firm grip on the business and their commitment to producing shareholder value.
It would be so easy for SDX to get over confident and take on too much overhead on the back of their drilling success, in an effort to speed up operations. Well done SDX.

Surely to goodness we will get Q3 results tomorrow.
I cannot wait for some news.
I am hoping to see our Cash balance at a healthy $45M+, despite the big capital spend during the period with receivables considerably reduced.