SDX Energy Regulatory News (SDX)

THE INFORMATION CONTAINED WITHIN THIS ANNOUNCEMENT IS DEEMED BY SDX TO CONSTITUTE INSIDE INFORMATION AS STIPULATED UNDER THE MARKET ABUSE REGULATION (EU) NO. 596/2014 AS IT FORMS PART OF UK LAW BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018 ("MAR"). ON THE PUBLICATION OF THIS ANNOUNCEMENT VIA A REGULATORY INFORMATION SERVICE ("RIS"), THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.

18 November 2021

SDX ENERGY PLC ("SDX", the "Company" or the "Group")

ANNOUNCES ITS FINANCIAL AND OPERATING RESULTS FOR THE THREE AND NINE MONTHS ENDED 30 SEPTEMBER 2021

SDX Energy Plc (AIM: SDX), the MENA-focused oil and gas company, is pleased to announce its unaudited financial and operating results for the three and nine months ended 30 September 2021. All monetary values are expressed in United States dollars net to the Company unless otherwise stated.

Mark Reid, CEO of SDX, commented:

"The first nine months of 2021 delivered strong growth in revenue, Netback and EBITDAX and resulted in a 50% increase in operating cash flows versus the same period in 2020, predominantly due to increased gas demand in Morocco and improved commodity pricing. The Company ended the period with a strong liquidity position and a significant net cash position of just under $10 million, which fully funds our work programmes for 2021 and 2022. Our producing assets in Egypt and Morocco continued to perform well in the period meaning that we remain above our mid-point guidance for the year with significant development opportunities in the next eighteen months to increase production further. We look forward to the imminent start of our second drilling campaign of the year in Morocco, drilling two wells before the year-end and obtaining the results of the first development well in a 13-well campaign at West Gharib in Egypt, which will give the Group the opportunity to instantly increase its exposure to the current high oil prices."

Three and nine months to 30 September 2021 Operations Highlights

· Entitlement production, for the nine months ended 30 September 2021, of 5,901 boe/d was 2% higher than 2021 mid point market guidance of 5,770 boe/d and 3% lower than the same period in 2020, excluding disposed assets, mainly due to natural decline, well workovers and expected sand and water production in two of the six wells in the nine months of 2021 at South Disouq.

· The Company's operated assets recorded a carbon intensity of 3.0kg CO2e/boe during the first nine months of 2021, which is one of the lowest rates in the industry. Scope 1 greenhouse gas emissions at operated assets were 7,300 tons of CO2e. Scope 3 greenhouse gas emissions in Morocco were 109,000 tons of CO2e, which is approximately 55,000 tons of CO2e less than using alternative heavy fuel oil.

· In South Disouq, a two-well development/exploration campaign took place between June and August 2021. The first well, the IY-2X step-out development well, was brought into production during the last week of August and will ensure that the Group maximises its recovery from the Ibn Yunus Field and maintains current gross production levels of c.45MMscfe/d at the South Disouq Central Processing Facility (the "CPF"). The second well, the Hanut-1X ("HA-1X") exploration well, spudded on 4 August and reached the target depth of 6,000ft on 17 August. The primary target for HA-1X was the Basal Kafr El Sheikh sand at approximately 5,200ft; however, the well found that the Basal Kafr El Sheikh sand had been eroded at this location. Whilst drilling to target depth, good quality sands were found at the Qawasim level; however, they were not charged with gas. As a result, the Company has recognised a US$1.3 million dry-hole cost in Q3 2021, comprising drilling costs (US$0.7 million), associated seismic costs (US$0.2 million) and the well's share of the exploration extension signature bonus (US$0.4 million).

· In West Gharib, following the 10-year concession extension granted earlier in 2021, the first well (MSD-21) in a 13-well campaign spud on 16 October 2021. It is estimated that the well will take around five weeks to drill and complete with tie-in to the existing infrastructure expected by mid-December 2021. With an expected gross cost to drill and tie in of US$0.9-US$1.0 million, MSD-21 is anticipated to come on-line and produce at around gross 300bbl/d, which would have an immediate effect on Group cashflow and result in a payback period of less than one year at current oil prices.

· The first phase of the Morocco drilling campaign, which consisted of three appraisal/development wells in SDX's operated Gharb Basin acreage in Morocco (SDX: 75% working interest), was successfully completed in June 2021. The OYF-3, KSR-17 and KSR-18 wells were all commercial successes and are producing into the Company's infrastructure. The second phase, which consists of two appraisal/development wells, will commence in the second half of November.

Nine months to 30 September 2021 Financial Highlights

The table below reflects the unaudited results of the Company for the three and nine months ended 30 September 2021 and 2020. The North West Gemsa and South Ramadan concessions, which were sold in Q3 and Q4 2020, respectively, are classified as discontinued operations (as required by IFRS). All revenues, costs and taxation from these assets have been consolidated into a single line item "profit from discontinued operations" in both periods reported. Per unit metrics do not include North West Gemsa or South Ramadan.

(1) Refer to the "Non-IFRS Measures" section of this release below for details of Netback and EBITDAX.

(2) South Disouq gas is sold to the Egyptian State at a fixed price of US$2.65 Mmbtu, which equates to approximately US$2.85/Mcf.

(3) EBITDAX for nine months ended 30 September 2021 and 2020 includes US$3.9 million and US$4.0 million, respectively, of non-cash revenue relating to the grossing up of Egyptian corporate tax on the South Disouq Production Sharing Contract "PSC" which is paid by the Egyptian State on behalf of the Company (US$1.3 million and US$1.3 million for the three months ended 30 September 2021 and 2020, respectively).

(4) For the nine months ended 30 September 2021, US$11.6 million of non-cash Exploration & Evaluation ("E&E") impairment is included within this line item (US$4.5 million for the nine months ended 30 September 2020).

(5) Excludes discontinued operations.

· Netback was US$32.6 million, 22% higher than the Netback of US$26.8 million for the nine months to 30 September 2020, driven by:

· Net revenue increase of US$6.5 million due to:

o US$1.3 million higher revenue at West Gharib as lower production (2021: 473 bbl/d, 2020: 639 bbl/d) was more than offset by higher realised service fees (2021: US$52.98/bbl, 2020: US$31.25/bbl);

o US$5.0 million higher revenue in Morocco due to increased production following strong demand rebound after COVID-19 shutdowns in early 2020 and an additional factory being supplied (2021: 951 boe/d, 2020: 735 boe/d). Revenue was further boosted by higher prices due to the strengthening of the Moroccan dirham and the additional factory taking gas at a higher price than the portfolio average;

o US$0.1 million higher South Disouq revenue due to new production from the SD-12X well (2021: 717 boe/d, 2020: 0 boe/d) and a higher realised price for condensate, partly offset by lower production from the other wells (2021: 3,760 boe/d, 2020: 4,710 boe/d) as a result of natural decline at several wells and downtime for workover activity.

· Operating costs increased by US$0.7 million from the prior period due to increased well management costs at South Disouq and higher training fees in Morocco, partly offset by lower costs at West Gharib due to cost savings and fewer workover activities.

· EBITDAX of US$29.7 million was 23% higher than US$24.1 million in the same period in 2020 due to the Netback factors described above.

· The main components of SDX's comprehensive loss of US$12.1 million for the nine months ended 30 September 2021 are:

· US$32.6 million Netback explained above;

· US$12.7 million of E&E expense which relates to the US$10.3 million non-cash impairment of the Lalla Mimouna Nord concession in Morocco, US$1.3 million dry-hole costs for HA-1X (including US$0.2 million of associated 3D seismic cost and US$0.4 million of allocated signature bonus) and ongoing new venture activity of US$1.1 million (predominantly internal management time). In the same period in 2020, US$4.5 million was written off following the drilling of two sub-commercial wells, SD-6X in South Disouq and SAH-5 in Morocco;

· US$23.3 million of DD&A expense, which was 31% higher than the US$17.8 million for the same period in 2020 as the result of higher production and lower 2P reserves in Morocco, which were partly offset by lower production at West Gharib;

· US$3.0 million of ongoing G&A expense; and

· US$5.3 million of corporation tax, predominantly for South Disouq.

· Operating cash flow (before capex, excluding discontinued operations) of US$22.6 million, was 50% higher than US$15.1 million for the same period in 2020, primarily as a result of Netback drivers discussed above, less cash spent on inventory and no payments made for income tax in 2020.

· Capex of US$19.6 million reflects:

o US$8.7 million (including US$0.5 million decommissioning provisions) on three wells in Morocco;

o US$2.9 million for well workovers and other projects in Morocco;

o US$6.6 million for the completion of the SD-12X tie in at South Disouq, well drilling preparations for IY-2X and HA-1X (including a US$0.6 million exploration extension signature bonus), the SD-4X well workover, and other minor capex projects at South Disouq;

o US$1.4 million for workovers and development drilling preparations in West Gharib;

· Liquidity: Closing cash as at 30 September 2021 was US$9.8 million. The Company has satisfied the conditions precedent on the five-year EBRD credit facility, which remains undrawn and has US$10.0 million availability.

· Together with cash generated from operations, the Company is fully funded for all planned activities in 2021 - 2022.

COVID-19 update

· The Company has had no COVID-19 business interruptions since Q2 2020, when three customers in Morocco resumed taking gas following a short period of mandatory shutdown. Egyptian production has remained unaffected by COVID-19. The Company continues to follow applicable government guidance in each of its territories.

Nine months 2021 Performance vs 2021 Guidance

Production

· Entitlement production for the nine months ended 30 September 2021 of 5,901 boe/d was 2% higher than midpoint guidance of 5,770 boe/d and 3% lower than the comparative period in 2020. An analysis of the first nine months of 2021 production by asset vs guidance is as follows:

o South Disouq: During the first nine months of 2021, the existing wells continued to exhibit natural decline and expected sand and water production from two of the four wells. This decline was partly offset by the contribution from the SD-12X well which was brought online in December 2020. The SD-1X and SD-4X wells were successfully worked over during the period and were put back on production at improved gas production rates and with reduced sand and water production. Production for the nine months was above midpoint guidance, with production for the remainder of the year expected to remain close to this as the impact of natural decline should broadly be offset by contribution from the IY-2X well.

o West Gharib: The existing wellstock at the asset continued to produce steadily, although exhibiting natural decline as expected. The first well (MSD-21) in a 13-well infill development campaign spud on 16 October 2021 and it will allow the Company to benefit from low-risk production growth into a higher commodity price environment. Production will trend towards lowpoint guidance until such time as the new wells are drilled and brought online.

o Morocco: The first nine months of 2021 saw stronger demand from all customers and this demand is the reason the Company is currently exceeding guidance. The period also reflects additional consumption from an existing customer's second factory which came online in December 2020. Production guidance is 8-12% higher than 2020 production and reflects a sustained return to normal levels of consumption across the customer base following COVID shutdowns which affected 2020 production.

o COVID-19: The 2021 production guidance presented assumes no significant production curtailments due to COVID-19. Should there be COVID-19 related disruptions, production guidance may be revised.

Capex

· Capex for the nine months to 30 September 2021 is shown below and is compared to the annual guidance figure of US$26.5-28.0 million which includes: one exploration and one development well in South Disouq together with workovers and the installation of an inlet compressor; five new wells and workovers are planned in Morocco; and two new wells will be undertaken at West Gharib with long lead items for the 13-well drilling campaign also to be purchased.

(1) Includes US$0.6 million of expenditure that was pre-paid as a project milestone in 2020 but has now been reclassified to capex.

(2) Includes US$0.5 million of non-cash decommissioning provisions.

o South Disouq: In the first nine months of 2021, US$6.6 million of capex was invested for the compressor project (US$2.0 million), the IY-2X development well (US$2.0 million), the completion of the SD-12X tie in (US$0.7 million), the HA-1X exploration well (US$0.7 million), the concession extension signature bonus (US$0.5 million), the workovers of SD-4X and SD-1X (US$0.3 million) and other CPF projects. 

o West Gharib: Two infill development wells will be drilled in Q4 2021 of which the first well, MSD-21, spud on 16 October 2021. In the first nine months of 2021, US$1.4 million of capex was spent on several well workovers and development drilling preparations.

o Morocco: In the first nine months of 2021, US$11.6 million of capex was spent on three development wells (US$8.7 million which includes US$0.5 million of decommissioning provisions) and other projects (US$2.9 million) including a well workover campaign. A further two development wells will be drilled in the next campaign in Q4 2021.

· The actual and anticipated timings of planned key capex activities are outlined below:

(1) Activity completed

2021 Drilling and Operations Update

Morocco drilling campaign update (SDX 75% working interest)

· The first phase of the Morocco drilling campaign consisted of three appraisal/development wells in SDX's operated Gharb Basin acreage (SDX: 75% working interest) and was successfully completed in June 2021. The OYF-3, KSR-17 and KSR-18 wells were all commercial successes and are producing into the Company's infrastructure.

· The second phase of the Moroccan drilling campaign is expected to commence in November 2021, with a further two wells planned.

· The above developments will allow the Company to continue to supply gas to our customers in line with our contractual commitments and continue to support lower CO2 emissions at our customers.

South Disouq Egypt exploration drilling campaign update (SDX 55%/100% working interest)

· Following the results of SD-12X, IY-2X, HA-1X and further review of the 3D seismic, management has now identified c.54bcf of mean unrisked recoverable volumes, which are close to our existing infrastructure, located in horizons that are either productive in South Disouq or in adjacent blocks and have now been high-graded to drill-ready prospects.

· The Company received final ministerial and parliamentary approval of the two-year extension to the South Disouq exploration area. The campaign kicked off with the drilling of the IY-2X development well in the Ibn Yunus field to accelerate production and cash flows. The well was tied in during the last week of August and the Company's expectations are that the IY-2X well will maximise recovery from the Ibn Yunus Field and help maintain current gross production levels of c.45MMscfe/d at the South Disouq Central Processing Facility.

· In August 2021, the second well, the HA-1X exploration well, spudded on 4 August and reached the target depth of 6,000ft on 17 August. The primary target for HA-1X was the Basal Kafr El Sheikh sand at approximately 5,200ft; however, the well found that the Basal Kafr El Sheikh sand had been eroded at this location. Whilst drilling to target depth, good quality sands were found at the Qawasim level; however, they were not charged with gas.

· Management's estimate of the mean prospective resources and chance of success of the prospects identified in the South Disouq area are shown below.

(1) Working interest % dependent on Partner's decision to participate in the extension.

· Following the results from the 2021 drilling campaign, the South Disouq Cash Generating Unit ("CGU") is expected to have a reduced economic life, and consequently the carrying value of the CGU is likely to be impaired by US$6.0 - US$9.0 million. The impairment will be finalised during Q4 2021 as part of the review of the future prospectivity of the concession and the 2021 reserves audit process.

West Gharib Egypt development drilling campaign update (SDX 50% working interest)

· In March 2021, SDX obtained approval for a 10-year extension to the West Gharib Production Services Agreement, increasing audited working interest 2P reserves in this core oil asset as at 31 December 2020 by 60% year on year, or 119% taking account of 2020 production, to 3.52 million barrels.

· Following this agreement, SDX and its partner commenced planning for a 13-well development drilling campaign plus one water injector well. These are part of a wider three-year plan to arrest production decline in the asset and return production levels to 4,000 - 4,500 bbl/d, taking advantage of low-risk production growth and the improved oil pricing environment. The first well, MSD-21, spud on 16 October 2021. 

First nine months of 2021 ESG metrics

· The Company's operated assets recorded a carbon intensity of 3.0 kg CO2e/boe during the first nine months of 2021, which is one of the lowest rates in the industry. This rate was higher than the 1.7 kg CO2e/boe reported for the 12 months ended 31 December 2020 as the booster compressor at South Disouq was online throughout the first nine months of 2021, but only from the second quarter in 2020, and the inlet compressor came online from August 2021. In January 2021 a second production compressor was commissioned in Morocco. Combined production from the two assets was also marginally lower during the first nine months of 2021 compared to the same period in 2020.

· Scope 1 greenhouse gas emissions at operated assets were 7,300 tons of CO2e. Scope 3 greenhouse gas emissions in Morocco were 109,000 tons of CO2e, which is approximately 55,300 tons of CO2e less than using alternative heavy fuel oil.

· There was one lost time injury recorded in Morocco in July 2021. A contractor sustained a minor injury in a road traffic accident, but after a short period of observation was able to return to work.

· No produced water was discharged into the environment in Morocco (100% contained and evaporated) or at South Disouq (100% recycled) during the first nine months of 2021.

· There were no hydrocarbon spills at operated assets during the first nine months of 2021.

· During the first nine months of 2021, the Company was delighted to support two hospitals close to the South Disouq operation by donating 13 monitors and BPAP ventilators to help to alleviate the current COVID-19 crisis and equip the teams there for the longer-term health of our local communities. In Morocco, the Company made significant progress on an initiative that will be launched in the fourth quarter of 2021.

· The Company continues to adopt high standards of governance through its adherence to the QCA Code on Corporate Governance.

Outlook

· Management believes that the Company is well-placed to weather the current macroeconomic uncertainties and continues to screen several business development opportunities.

· 2021 production and capex guidance reaffirmed and anticipated 2021 and 2022 work programmes are fully funded.

· Cash generation is expected to continue strongly through 2021 and beyond as approximately 85% of the Company's cash flows are expected to be generated from fixed-price gas businesses.

· Despite the volatility of the commodities market, the current strong oil price and outlook means that the Group plans to capitalise on its recent production service agreement extension at West Gharib by investing in a 13-well development drilling programme over the next 18 months, including two wells in 2021.

· The anticipated 2021 and 2022 work programmes are fully funded.

· The Company continues to assess the optimum use of capital in the interests of all stakeholders, whether that be investment into new projects or returning cash to shareholders. At present the Company is focusing on continuing to invest in its portfolio and considers this to be the most appropriate use of the Company's capital. This will be assessed on an ongoing basis.

KEY FINANCIAL & OPERATING HIGHLIGHTS 

(1) Refer to the "Non-IFRS Measures" section of this release below for details of Netback and EBITDAX.

(2) Excludes discontinued operations

About SDX

SDX is an international oil and gas exploration, production and development company, headquartered in London, United Kingdom, with a principal focus on MENA. In Egypt, SDX has a working interest in two producing assets: a 55% operated interest in the South Disouq and Ibn Yunus gas fields and a 100% operated interest in the Ibn Yunus North gas field, all in the Nile Delta and a 50% non-operated interest in the West Gharib concession, which is located onshore in the Eastern Desert, adjacent to the Gulf of Suez. In Morocco, SDX has a 75% working interest in five development/production concessions, all situated in the Gharb Basin. The producing assets in Morocco are characterised by attractive gas prices and exceptionally low operating costs. SDX has a strong weighting of fixed price gas assets in its portfolio with low operating costs and attractive margins throughout, providing resilience in a low commodity price environment. SDX's portfolio also includes high impact exploration opportunities in both Egypt and Morocco.

For further information, please see the Company's website at www.sdxenergygroup.com or the Company's filed documents at www.sedar.com.

Competent Persons Statement

In accordance with the guidelines of the AIM Market of the London Stock Exchange, the technical information contained in the announcement has been reviewed and approved by Rob Cook, VP Subsurface of SDX. Dr. Cook has over 25 years of oil and gas industry experience and is the qualified person as defined in the London Stock Exchange's Guidance Note for Mining and Oil and Gas companies. Dr. Cook holds a BSc in Geochemistry and a PhD in Sedimentology from the University of Reading, UK. He is a Chartered Geologist with the Geological Society of London (Geol Soc) and a Certified Professional Geologist (CPG-11983) with the American Institute of Professional Geologists (AIPG).

For further information:

Analyst Conference Call

CEO Mark Reid and CFO Nick Box will host an analyst conference call to discuss the results at 04:00 pm GMT today.

Please let us know if you and/or a colleague would like to attend by emailing tessa.gough-allen@camarco.co.uk or calling 0203 781 9245.

Glossary

Forward-looking information

Certain statements contained in this press release may constitute "forward-looking information" as such term is used in applicable Canadian securities laws. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or are not statements of historical fact should be viewed as forward-looking information. In particular, statements regarding the intended timing of recording an impairment charge against the South Disouq CGU, the Company's 2021 production and capex guidance, and future drilling developments, costs and results should all be regarded as forward-looking information.

The forward-looking information contained in this document is based on certain assumptions, and although management considers these assumptions to be reasonable based on information currently available to them, undue reliance should not be placed on the forward-looking information because SDX can give no assurances that they may prove to be correct. This includes, but is not limited to, assumptions related to, among other things, commodity prices and interest and foreign exchange rates; planned synergies, capital efficiencies and cost-savings; applicable tax laws; future production rates; receipt of necessary permits; the sufficiency of budgeted capital expenditures in carrying out planned activities, and the availability and cost of labour and services.

All timing given in this announcement, unless stated otherwise, is indicative, and while the Company endeavours to provide accurate timing to the market, it cautions that, due to the nature of its operations and reliance on third parties, this is subject to change, often at little or no notice. If there is a delay or change to any of the timings indicated in this announcement, the Company shall update the market without delay.

Forward-looking information is subject to certain risks and uncertainties (both general and specific) that could cause actual events or outcomes to differ materially from those anticipated or implied by such forward-looking statements. Such risks and other factors include, but are not limited to, political, social, and other risks inherent in daily operations for the Company, risks associated with the industries in which the Company operates, such as: operational risks; delays or changes in plans with respect to growth projects or capital expenditures; costs and expenses; health, safety and environmental risks; commodity price, interest rate and exchange rate fluctuations; environmental risks; competition; permitting risks; the ability to access sufficient capital from internal and external sources; and changes in legislation, including but not limited to tax laws and environmental regulations. Readers are cautioned that the foregoing list of risk factors is not exhaustive and are advised to refer to the Principal Risks & Uncertainties section of SDX's Annual Report for the year ended 31 December 2020, which can be found on the Company's website at https://www.sdxenergygroup.com/ and on SDX's SEDAR profile at www.sedar.com, for a description of additional risks and uncertainties associated with SDX's business.

The forward-looking information contained in this press release is as of the date hereof and SDX does not undertake any obligation to update publicly or to revise any of the included forward‐looking information, except as required by applicable law. The forward‐looking information contained herein is expressly qualified by this cautionary statement.

Non-IFRS Measures

This news release contains the terms "Netback," and "EBITDAX" which are not recognized measures under IFRS and may not be comparable to similar measures presented by other issuers. The Company uses these measures to help evaluate its performance.

Netback is a non-IFRS measure that represents sales net of all operating expenses and government royalties. Management believes that Netback is a useful supplemental measure to analyze operating performance and provide an indication of the results generated by the Company's principal business activities prior to the consideration of other income and expenses. Management considers Netback an important measure as it demonstrates the Company's profitability relative to current commodity prices. Netback may not be comparable to similar measures used by other companies.

EBITDAX is a non-IFRS measure that represents earnings before interest, tax, depreciation, amortization, exploration expense and impairment. EBITDAX is calculated by taking operating income/(loss) and adjusted for the add-back of depreciation and amortization, exploration expense and impairment of property, plant, and equipment (if applicable). EBITDAX is presented in order for the users to understand the cash profitability of the Company, which excludes the impact of costs attributable to exploration activity, which tend to be one-off in nature, and the non-cash costs relating to depreciation, amortization and impairments. EBITDAX may not be comparable to similar measures used by other companies.

Oil and Gas Advisory

Certain disclosures in this news release constitute "anticipated results" for the purposes of National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities ("NI 51-101") of the Canadian Securities Administrators because the disclosure in question may, in the opinion of a reasonable person, indicate the potential value or quantities of resources in respect of the Company's resources or a portion of its resources. Without limitation, the anticipated results disclosed in this news release include estimates of volume, flow rate, production rates, porosity, and pay thickness attributable to the resources of the Company. Such estimates have been prepared by Company management and have not been prepared or reviewed by an independent qualified reserves evaluator or auditor. Anticipated results are subject to certain risks and uncertainties, including those described above and various geological, technical, operational, engineering, commercial, and technical risks. In addition, the geotechnical analysis and engineering to be conducted in respect of such resources is not complete. Such risks and uncertainties may cause the anticipated results disclosed herein to be inaccurate. Actual results may vary, perhaps materially.

Use of the term "boe" or the term "MMscf" may be misleading, particularly if used in isolation. A "boe" conversion ratio of 6 Mcf: 1 bbl and a "Mcf" conversion ratio of 1 bbl: 6 Mcf are based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Reserve and Resource Data

The reserve and resource estimates disclosed or referenced herein have been prepared by Dr. Rob Cook, a qualified reserves evaluator, in accordance with the SPE's Canadian Oil and Gas Evaluation Handbook and in accordance with NI 51-101. The reserves and resources disclosed herein have an effective date of 31 December 2020. Dr. Cook holds a BSc in Geochemistry and a PhD in Sedimentology from the University of Reading, UK. He is a Chartered Geologist with the Geological Society of London (Geol Soc) and a Certified Professional Geologist (CPG-11983) with the American Institute of Professional Geologists (AIPG).

Prospective resources are those quantities of gas, estimated as of the given date, to be potentially recoverable from undiscovered accumulations through future development projects. As prospective resources, there is no certainty that any portion of the resources will be discovered. The chance that an exploration project will result in a discovery is referred to as the "chance of discovery" as defined by the management of the Company.

There is no certainty that it will be commercially viable to produce any portion of the resources discussed herein; though any discovery that is commercially viable would be tied back to the Company's pipeline in Morocco and then connected to customers' facilities within 9 to 12 months of discovery. Based upon the economic analysis undertaken on any discovery, management has attributed an associated chance of development of 100%.

There are uncertainties associated with the volume estimates of the prospective resources disclosed herein, due to the level of information available on prospective resources, but ranges are defined based on data from the Company's nearby existing analogous wells. Some of the risks and uncertainties are outlined below:

· Petrophysical parameters of the sand/reservoir;

· Fluid composition, especially heavy end hydrocarbons;

· Accurate estimation of reservoir conditions (pressure and temperature);

· Reservoir drive mechanism;

· Potential well deliverability; and

· The thickness and lateral extent of the reservoir section, currently based on 3D seismic data.