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"Got to be due next week, surely...."
Surely not. My guess is 3Q results announced the week of Novenber 26. And although the 3Q numbers should be good, people should be prepared for a miss on the 8,000 BOE/D exit target. I just don't see how that can be achieved without South Disouq being on line and we haven't heard anything about construction of facilities and pipeline having even started yet. Which explains the SP weakness in my opinion on top of a generally lousy market climate. Just my opinion of course.
The fact that PW did not really want to drill the well and tried to wiggle out of the $3 million commitment suggest to me that he didn't think there was much more than 10MMBO gross potential to justify the risk. Of course he could have been wrong.
"I just wonder what level of discovery there might make our interest (12.5%) something of value?"
Simple math suggests that anything over 20MMBO gross would be significant. Valued at $5/B in the ground that would imply a value of $100 million gross or $12.5 million net which would be a 10% increase to our market cap. Personally I value South Ramadan as a $3 million liability assuming it will be a dry hole (maybe a $4 to 5 million liability given how long it's taking to drill). Anything above that would be a plus.
RE: "Because SDX is debt freeeeeeeeee and producing lots of cash :) "
The difference is that with a corporate bond YOU get the cash and YOU decide how to reinvest it. The BP leak was very destructive and is the main reason for the price weakness ( in addition to the lack of news of concrete progress in tying in SD). People don't want to buy a pig in a poke no matter how pretty the last one turned out to be. PW should come out and say categorically that they will not do any acquisitions until: :
1. SD is on line and producing at least 50 MMCF/D
2. Morocco has signed enough new customers to be doing 10 MMCF/D
3. The two Lalla Mimouna wells have been tested
4. The 2019 exploration program in Egypt and Morocco is completed and at least one oil target has been tested in SD.
Just IMHO of course.
re "SDX breakeven price is $10 per barrel so oil price shouldn't matter too much" is really faulty economic thinking.
SDX produces about 3,600 b/d of crude according to the August presentation as quoted below:
Entitlement production at 23/8/18
▪ NW Gemsa 2,777 boepd – Gross 5,553 boepd
▪ Meseda 917 boepd – Gross 4,704 bopd (sales)
▪ Morocco 750 boepd – Gross 1,000 boepd
Total 4,444 boepd
So each $1 change in the price of crude translates to $1.3 million in annual revenue before taxes at the margin. If taxes and government take are about 50% that still means CF is affected by roughly $650,000 for every dollar in crude price change.. The Breakeven price is irrelevant.
" George Ensor at R & M UK Micro Cap Investment is the guy who manages the fund holding SDX. "
Oops... I hope he doesn't have to dump SDX when it becomes a $1 billion company !!! What's his threshold for Micro-cap?
A hostile bid for SDX is as likely as my starting at QB for the NE Patriots in the Super Bowl. The people who can block a low-ball bid can fit around a small coffee table at Starbucks
I sure hope PW has pictures of the South Disouq gas processing facility and pipe laying in the ground by October 16 or he will have to start back pedaling on the 8,000 BOE/D exit target for 2018.
does your wife buy more eggs if they are 2.50 a dozen or 5.00 for two dozen?
Smith & Williamson Investment Management LLP reported as of Aug, 31, 2018 that they had sold 4,000,000 shs leaving them with 200,000 shs as of that date. (According to FACTSET - but they don't always have all the facts right right....)
LGO-fan,
The main element of hitting the 8,000 BOE exit target is putting the 60 MMCF/D South Disouq gas on production in Egypt by the end of December. 60 MMCF/D or 10,000 BOE/D gross which translates to 5,500 BOE/D net to our interest. That will happen practically overnight when the plant is built and they turn the valves on (with the normal ramping up for a new facility). Of course not all BOEs are created equal. Gas in Egypt will probably sell for $2.65/MCF while in Morocco it sells for 4x that much. So beware of simple metrics and focus on the cash generation capacity of the business. It is already very good at US $3.5 million a month and should get A LOT BETTER in 2019.
No direct connection to SDX but Eni is the big elephant in Egypt so one has to watch them too. Anything they do that strengthens the financial condition of EGPC makes it more likely the Egyptians will continue to pay down their accounts receivable and meet their obligations.
Eni: Lease Extension for Key Assets in Egypt Nile Delta and in the Western Desert
Tuesday, August 14, 2018 09:34:28 AM (GMT)
Eni: Lease Extension for Key Assets in Egypt Nile Delta and in the Western Desert
San Donato Milanese (Milan), 13 August 2018 – Eni announces that Egyptian Authorities have authorized a new Nile Delta Concession Agreement allowing a ten-year extension of the Abu Madi West Development Lease (203 km2), where the Nooros field is located, and the execution of further exploration activities within El Qar’a Exploration Lease (64 km2). These assets are located in the “Great Nooros Area”, one of the most prolific areas of the Nile Delta, offshore Egypt.
Furthermore, Egyptian Authorities have authorized a five-year extension of the Ras Qattara Concession Agreement and relevant Development Lease. Following this extension, a new drilling campaign in the Zarif and Faras fields will unlock remaining hydrocarbon reserves and allow further exploration activities within the Western Desert basin.
The Great Nooros Area’s asset lease extension strengthens Eni’s gas portfolio while confirming the success of Eni’s strategy of near field exploration that has revitalized production in the Nile Delta area, where the Nooros field is currently producing 32 million cubic meters of gas per day, corresponding to about 215,000 boed. Eni, through its subsidiary IEOC, holds a 75% stake if the Concession in partnership with BP, which has a 25% stake. The operator of “Nile Delta” is Petrobel, a joint venture between IEOC and Egyptian General Petroleum Corporation (EGPC).
In the the Ras Qattara concession, which covers an area of 104 km2, Eni holds a 75% stake while its partner INA holds a 25% stake. The Operator is AGIBA, a joint venture between Eni’s subsidiary IEOC and Egyptian General Petroleum Corporation (EGPC). The Ras Qattara extension will reinforce AGIBA oil operated production in the Western Desert area.
Eni has been present in Egypt since 1954, where it operates through its subsidiary IEOC. The company is the country's leading producer with equity of approximately 300,000 barrels of oil equivalent per day.
Countries: Italy
Languages: English
Primary Identifiers: ENI-IT
Regions: Europe - Western
Related Identifiers: ENI-IT, E-IT
Source: https://www.eni.com/en_IT/media/2018/08/eni-lease-extension-for-key-assets-in-egypt-nile-delta-and-in-the-western-desert
Source List: https://www.eni.com/en_IT/media/press-releases.page
Subjects: Company Announcements and Releases
Northern, I certainly hope PW is NOT considering any acquisitions at this point. Circle Oil was the steal of a lifetime and we are not likely to see such a bargain again. SDX is blessed with a number of HIGH RETURN development and exploration projects in Morocco and South Disouq. We are not blessed with a market valuation that reflects our current assets and prospects. Why would we dilute what we own to chase other assets?
PW has said more than once that he wants to build a US $1 billion company. I want him to do it also but with 200 million shares outstanding, not 1 billion shares. Concentrate on putting SD gas on production and adding Morocco customers in the next six months and then get ready for another round of drilling in both countries in 2019. That is the way to build value, IMHO.
I was very excited about the two LM "discoveries" but the fact remains that neither one was successfully flow tested. That is IMO one of the reasons for the weakness in the stock. In this lousy market, nobody gets excited about logs or seismic. People want to see flow rates and pipe in the ground for quick production and CF.
The first test for PW will be to meet the expectations of 50MMCF/D in Egypt and 8 -10 MMCF/D in Morocco by year end. That should give Mr. Market confidence that we will have the CF for the ambitious drilling program in 2019.
The real excitement will be when the new rig arrives in Morocco for the 12 well program and workovers on the 2 LM wells. As I understand it, it will all be done with oil based muds to deal with the high pressure and avoid skin damage. If the two 2018 LM wells can flow successfully at high rates and a few more wells like them are drilled in Lalla Mimouna and Gharb Centre concessions, people will certainly notice.
When it looks like SDX has the reserves and customers to fill the 24 MMCF/D pipeline, the wall of cash will be hard to hide. 75% of 24 MMCF/D at $10/MCF with low opex should generate roughly US $60 million /yr or about 22p/sh. Put a multiple of 4 or 5 x on it and you get a value of 100p for Morocco alone with Egypt thrown in for free. It might take 3 or 4 years to get there but investing requires patience. Then dare to imagine another gas discovery (or even better oil) in Egypt and you can have some real fireworks.
For those who need constant stimulation, there is always the casino. Long-term investing requires patience.
If you don't mind boredom, you are invited to check (occasionally) the Investor Village BB. We don't ***** much about the stock price, we don't entertain conspiracy theories, we don't jump every time Malcy or Schachter opens his mouth. We only comment when there is news, discuss valuation drivers or try to clarify or correct misinformation. And we won't have much to say until we see whether (a) South Disouq gas really goes online in December at rates capable of at least 50 MMCF/D and (b) whether enough new customers get connected in Morocco by year-end to raise sales from 6 MMCF/D tp 8-10 MMCF/D. Those are the only two things that matter in the next six months. After that, we will be watching for the 2019 drilling campaigns.
"there is a risk if our sp is still low of an opportunistic take over bid. But that would be some way off."
NO SUCH RISK, IMO. Two groups control 50% and won't let that happen. PW can sleep easy...
Must be as I can’t believe Tang could be so incompetent? Maybe he is not incompetent but self-serving and crooked.....If NAV as of 21 March 2018 were really 14p /share, then the ONLY defensible investment policy would be to buy in as many shares of POL as possible at 4p.
Sorry about the confusion. I thought Northern was asking about the Sound farmout in Morocco, not about SD development wells. Every well has some risk. But my understanding is that the SD4-X and SD3-X wells are on the same seismically defined structure as the SD1-X discovery well so they should be less risky than Kelvin. If they are successful, they will add to the reserves and productive capacity and form a solid backstop for the gas development project. Hopefully, by the end of 2018 we will have four wells capable of doing a combined 50 MMCF/D gross which should generate roughly US$10 million net to our interest after taxes.
Northern Magic, what kind of a question is that? If they knew the oil and gas was there, they would get a rig and drill, drill, drill. They are hoping to get somebody else to take the risk and spend the $$$ to find out so they end up with a smaller interest in what might be there without risking the capital (that they don't have). Not the kind of deal I would like to enter from the SDX point of view. We have lots of cash, good CF and HIGH RETURN investment projects in Morocco and South Disouq. No need for us to pay up to prove somebody else's prospects.