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 ("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.

26 November 2018

SDX ENERGY INC

("SDX" or the "Company")

SDX ENERGY INC. ANNOUNCES ITS FINANCIAL AND OPERATING RESULTS FOR THE THIRD QUARTER AND NINE MONTHS TO SEPTEMBER 30, 2018

SDX Energy Inc. (TSXV, AIM: SDX), the North Africa focused oil and gas company, is pleased to announce its unaudited financial and operating results for the three and nine months ended September 30, 2018. All dollar values are expressed in United States dollars net to the Company unless otherwise stated.

Highlights - three and nine months ended September 30, 2018

Corporate and Financial

· SDX's key financial metrics for the three and nine months ended September 30, 2018 and 2017 are as follows:

Note:

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

(2) EBITDAX for Q3 2018 and 2017 and nine months to September 30, 2018 and 2017 includes US$1.5 million and US$1.0 million and US$3.7 million and US$2.6 million respectively of non-cash revenue relating to the grossing up of Egyptian Corporate Tax on the North West Gemsa PSC which is paid by the Egyptian State on behalf of the Company.

· The above financial metrics for the three and nine months ended September 30, 2018 and 2017 reflect the impact of the acquisition of the Egyptian and Moroccan businesses of Circle Oil plc (the "Circle Acquisition") from January 27, 2017 for consideration of US$28.1 million.

· The main components of SDX's comprehensive income of US$4.1 million for the nine months ended September 30, 2018 are:

o US$31.3 million netback/gross profit for the period;

o US$5.5 million of E&E write down, predominantly relating to two sub-commercial exploration wells in Morocco and one sub-commercial exploration well in Egypt;

o US$10.9 million of DD&A;

o US$3.8 million of G&A; and

o US$5.2 million of corporate income tax expense.

· Netback for the nine months to September 30, 2018 was US$31.3 million, up from US$20.4 million for the nine months to September 30, 2017. The increase in netback was due to;

o The Circle acquisition completing on January 27, 2017, therefore nine months to September 30, 2017 results only included eight months of 'Circle' activity versus a full nine months to September 30, 2018 results; and

o The nine months to September 30, 2018 also benefited from improved oil prices impacting SDX's Egyptian producing assets, higher realised gas pricing in Morocco due to a contract price increase, and favourable currency movement and improved production in the Meseda concession.

· Cash position of US$18.7 million as at September 30, 2018 was US$7.1 million lower than the US$25.8 million at December 31, 2017 reflecting the impact of the capital investment programme discussed below, which has led to production growth and strong operating cashflow in the period.

· US$35.7 million of capital expenditure has been invested into the business during the nine months ended September 30, 2018. The main elements of this were;

o US$16.3 million in Morocco - US$12.1 million for the now completed nine-well drilling programme and customer connection projects and US$4.2 million for the mobilisation and acquisition costs for the 240km2 3D seismic programme in Gharb Centre;

o US$9.2 million on South Disouq - US$8.4 million for the drilling programme, including the Ibn Yunus-1X, SD-4X and SD-3X discovery wells and the sub-commercial Kelvin-1X well and US$0.8 million for the mobilisation of equipment for the 170km2 3D seismic programme;

o US$7.3 million in North West Gemsa for the AASE-25, AASE-27 and Al-Ola-4 discovery wells;

o US$1.1 million in Meseda for the Rabul-5, Rabul-4, MSD-16 and MSD-15 discovery wells and the ongoing ESP replacement programme;

o US$1.2 million in South Ramadan relating to the SRM-3 well which is currently drilling; and

o US$0.6 million relating to new office equipment in Cairo and additional technical software.

· The Company further improved its available liquidity when it announced on July 18, 2018 that it had secured a three year, US$10.0 million Credit Facility (the "Facility") with the European Bank for Reconstruction and Development. This Facility, which has an additional US$10.0 million accordion feature, can be used for drilling costs and customer connections in Morocco. Interest on drawings from the Facility will be charged at US$ Libor plus 4.0% for drawings up to US$5.0 million and US$ Libor plus 4.5% on all drawings, if drawings are greater than US$5.0 million. As at September 30, 2018, the Facility remains undrawn.

Operational Highlights

· The Company's entitlement share of production from its operations for the nine months ended September 30, 2018 was 3,889 boe/d (Gross - 9,971 boe/d) split as follows;

o North West Gemsa 2,472 boe/d (Gross - 4,944 boe/d)

o Meseda 802 bbl/d  (Gross - 4,207 bbl/d)

o Morocco 615 boe/d (Gross - 820 boe/d)

· As a result of the ongoing development drilling and workover programme in North West Gemsa and Meseda, production has increased with actual entitlement production on November 23, for Egypt and Morocco amounting to 4,156 boe/d (Gross - 11,109 boe/d) split as follows;

o North West Gemsa 2,496 boe/d (Gross - 4,992 boe/d)

o Meseda 998 bbl/d (Gross - 5,234 bbl/d)

o Morocco 662 boe/d (Gross - 883 boe/d)

Egypt

· In North West Gemsa (SDX 50% working interest and non-operator), a seven well workover programme was undertaken and three new infill wells, AASE-25, AASE-27 and Al Ola-4 were successfully completed. AASE-25 was targeting an un-swept area of the field in the Rahmi sand and encountered 32 feet of net light crude oil bearing pay in this section. The well was subsequently completed as a producer in the Rahmi and is currently producing approximately 810 boe/d of light crude oil. AASE-27 was also targeting an un-swept area of the field in the Rahmi and encountered 13.5 feet of net light crude oil bearing pay. The well was completed as a producer in the Rahmi and is currently producing approximately 260 boe/d of light crude oil. Al Ola-4 was drilled as a replacement well in the Rahmi after the original well failed due to a mechanical problem. Al Ola-4 encountered 14 feet of net light crude oil bearing Rahmi section and, on test, flowed 1,011 boe/d. It is currently producing approximately 1,340 boe/d of light crude oil. The results of these wells and the ongoing workover programme are expected to result in an average field production rate for the year of approximately 4,400 boe/d of light crude oil (SDX net: 2,200 boe/d) in line with Company guidance.

· In Meseda (SDX 50% working interest and non-operator), an ESP replacement programme is underway and four wells have been successfully completed; Rabul-5, Rabul-4, MSD-16 and MSD-15. Rabul-5 encountered 151 feet of net heavy crude oil pay, with an average porosity of 18% across the Yusr and Bakr formations and Rabul-4 encountered 43 feet of net heavy crude oil pay also across the Yusr and Bakr, with an average porosity of 16%. Both wells were completed and placed on production with Rabul-5 currently producing approximately 1,500 bbl/d of heavy crude oil and Rabul-4 producing approximately 400 bbl/d of heavy crude oil. MSD-16 was drilled as a crestal infill producer in a newly available area of the field 100 meters from the concession boundary after an agreement was reached with the offset operator to reduce the boundary stand-off limits. The well encountered 176 feet of net heavy crude oil pay in the ASL reservoir section with an average porosity of 22%. The well was completed as a producer in the ASL using an ESP pump to provide artificial lift and is currently producing approximately 1,000 bbl/d of heavy crude oil. A second lease line development well, MSD-15, was successfully completed after encountering 226 feet of net heavy crude oil pay in the ASL section and is currently producing approximately 1,200 bbl/d using an ESP to provide artificial lift. Post period end, the Rabul-2 well was recompleted with incremental production of approximately 1,000 bbl/d of heavy crude oil now coming from this well. The results of these wells and the ongoing workover programme are expected to result in an average field production rate for the year of approximately 3,800 bbl/d of heavy crude oil (SDX net: 732 bbl/d) in line with Company guidance.

· In South Disouq (SDX 55% working interest and operator), the Company announced on April 12, 2018 that a gas discovery had been made at its Ibn Yunus-1X exploration well. The well was drilled to a TD of 9,068 feet and encountered 101 feet of net conventional natural gas pay in the Abu Madi horizon, with average porosity in the pay section of 28.5%. The well came in on prognosis but with a reservoir section that was of better quality and thicker than pre-drill expectations. On May 18, 2018, the well successfully flow tested conventional natural gas at a stabilised rate of 39.3 MMscf/d on a 32/64" choke. This flow rate exceeded initial expectations and was limited by the surface facilities in place. The well was subsequently completed in the Kafr El Sheik section and then suspended for future production.

· The Kelvin-1X exploration well was spud on May 8, 2018 and drilled to a total depth of 8,075 feet, encountering 606 net feet of high quality reservoir interval in the Abu‐Madi formation, with an average porosity of 21%. However, the sands had low gas saturation and were not deemed to be commercial. The well was subsequently plugged and abandoned.

· The SD-4X appraisal well was spud on June 4, 2018 and drilled to a total depth of 7,806 feet and encountered 89 feet of net conventional natural gas pay in the Abu Madi horizon, with an average porosity in the pay section of 24%. The well came in on prognosis with a reservoir section of similar quality but thicker than the original SD-1X discovery well. The well was completed in the Abu Madi section and tested at a maximum rate of 30.4 MMscf/d during an eight-hour clean up period. The well was then shut in for eight hours, during which time no pressure decline was observed. Following this, the well was flowed at varying choke sizes for two successive 12-hour periods at average rates of 5.4 MMscf/d and 8.6 MMscf/d respectively, and then one extended flow period of 24-hours at an average rate of 10.5 MMscf/d. The well was then suspended for future production.

· The SD-3X appraisal well was spud on July 5, 2018, drilled to a total depth of 7,842 feet, and encountered 32.6 feet of net conventional natural gas pay in the Abu Madi and Kafr el Sheik horizons, with an average porosity in the pay sections of 21.7%. The well was completed as a producer in the Abu Madi horizon and tested at a flow rate of 16.1 MMscf/d of conventional natural gas. In order to optimise the potential recovery from the SD-3X well, the Abu Madi horizon will be completed and produced initially before re-entering the well to complete and produce the Kafr el Sheik horizon. The well will be connected to the infrastructure located adjacent to the original SD-1X discovery.

· Whilst both SDX and its partner IPR have submitted the development lease application for South Disouq to the authorities, and have agreed to a gas price of US$2.85/mcf, the expected timing of obtaining final regulatory approvals and an update to the design of the central processing facility to accommodate the higher than expected levels of condensate and liquids in the gas, means that first production is now expected to commence in H1 2019. The Company is targeting an initial gross plateau production rate of conventional natural gas of between 50-60 MMscf/d from the three development wells in the SD-1X discovery structure and the Ibn Yunus discovery.

· At South Ramadan (SDX 12.75% working interest and non-operator), the SRM-3 appraisal well was spud on June 14, 2018. The well is targeting undrained light oil volumes up-dip of one of the previous producing wells in the field. The well encountered drilling problems and post period end had to be side-tracked. As at date of writing, it is expected that drilling operations will be completed in the next six to eight weeks and the Company's overall financial exposure to the concession commitment is expected to remain at approximately US$3.0 million. The SRM-3 well is the last remaining commitment well on the South Ramadan concession and, based on the results of this well, the Company will decide how best to optimise its position in the licence.

Morocco

· The Company's Moroccan acreage consists of three concessions; Sebou, Lalla Mimouna Nord and Gharb Centre, all of which are located in the Gharb Basin in northern Morocco (SDX 75% working interest and operator). Sebou and Lalla Mimouna were obtained as part of the Circle acquisition and Gharb Centre was acquired directly from the Moroccan State on July 11, 2017.

· In September 2017, the Company began a nine-well drilling programme covering six appraisal/development wells in Sebou, one appraisal/development well in Gharb Centre, and two exploration wells in Lalla Mimouna.

· The results of the nine-well programme saw the Company achieve seven successful wells, including the LNB-1 and LMS-1 exploration wells in the Lalla Mimouna concession.

· As a result of the success in LNB-1 and LMS-1, a two year extension to the Lalla Mimouna Nord permit was granted, extending its validity from July 2018 to July 2020.

· The Company's 240 km2 3D acquisition programme in the Gharb Centre permit has been successfully completed, with the acquired data now in the processing phase. Interpretation is expected to start late 2018/early 2019 and the Company is pleased to advise that it expects the total cost for the acquisition, processing, and interpretation of the 3D to be approximately US$6.0 million as previously guided.

· Gross production in Morocco for the nine months to September 30, 2018 was approximately 5.2 MMscf/d or (867 boe/d) of conventional natural gas 3.9 MMscf/d or (645 boe/d) net to SDX. During the quarter, the Company entered into gas sales agreements with the following customers, Peugeot, Setexam, Extralait, and GPC Kenitra. Gas sales to Peugeot have commenced on a test basis, with sales expected to commence to the remainder of the new customers in late November 2018. In addition, post period end, gas sales agreements were signed with Citic Dicastal and Omnium Plastic.

· With the gas sales contracts already signed, SDX has achieved its previously guided contracted volumes of 8-10 MMscf/d of conventional natural gas as at December 31, 2018. However, due to a longer than expected start-up phase with one of its customers, actual gas sales at December 31, 2018 are expected to be just below 8 MMscf/d.

Outlook:

Egypt

· North West Gemsa (50% Working Interest and non-operator)

o Targeting FY 2018 gross production of approximately 4,400 boe/d of light crude oil, in line with Company guidance provided at the start of the year.

o Workover programme to complete in Q4 2018, however no further drilling is planned.

o SDX's share of North West Gemsa FY 2018 capex is expected to be approximately US$8.0 million with approximately US$0.6 million of this to be incurred in Q4 2018.

· Meseda (50% Working Interest and non-operator)

o Targeting FY 2018 gross production of 3,800 bbl/d of heavy crude oil, approximately 700 bbl/d higher than 2017's level, and in line with Company guidance provided at the start of the year.

o Workover programme to complete in Q4 2018, however no further drilling planned.

o SDX's share of Meseda FY 2018 capex is expected to be approximately US$1.8 million with approximately US$0.7 million of this to be incurred in Q4 2018.

· South Disouq (55% Working Interest and operator)

o Obtain remaining regulatory approvals and complete construction of South Disouq processing facility, well tie-ins and a 10-kilometre pipeline connecting the processing facility to the main export line.

o First gas is targeted during H1 2019 at an initial gross plateau production rate of between 50-60 MMscf/d of conventional natural gas from the three development wells in the SD-1X discovery structure and the Ibn Yunus discovery. 

o SDX's share of South Disouq FY 2018 capex is expected to be approximately US$11.5 million with approximately US$2.3 million to be incurred in Q4 2018 to complete the 170 km2 3D acquisition programme. SDX's US$15 million share of the capex for the processing facility, well tie-ins and a 10-kilometre pipeline to the main export line will be incurred during H1 2019.

· South Ramadan (12.75% Working Interest and non-operator)

o The SRM-3 well is the last remaining commitment well on the South Ramadan concession and based upon the results of this well, the Company will decide how best to optimise its position in the licence.

o Gross South Ramadan capex FY 2018 is expected to be approximately US$23.5 million (SDX net: US$3.0 million). Approximately US$2.0 million of this capex is still to be incurred in Q4 2018.

Morocco (75% Working Interest and operator)

· Given the recent drilling success, 2018 gross production is targeted to increase in line with new customer tie-ins with the Company targeting gross production of 8-10 MMscf/d of conventional natural gas during H1 2019.

· SDX's nine-well Moroccan drilling programme completed on May 7, 2018 with the LMS-1 discovery. The Company is now planning for the mobilisation of equipment for a further drilling campaign in 2019, during which the LNB-1 and LMS-1 wells in Lalla Mimouna will be re-tested, with the remainder of the programme's targets coming from the recently acquired Gharb Centre 3D seismic.

· The Company will complete the processing and interpretation of the 240km2 of 3D seismic in its Gharb Centre by late 2018/early 2019.

· SDX's share of Morocco FY 2018 capex is expected to be approximately US$18.0 million with approximately US$1.8 million relating to the completion of the 240km2 Gharb Centre 3D seismic to be incurred in Q4 2018.

Corporate

· Continue to minimise costs and crystallise synergies from the Circle Oil acquisition; and

· As part of the Company's strategy, SDX continues to review and explore opportunities to expand the asset base in the North Africa region, including through new licencing rounds and acquisitions.

Paul Welch, President & CEO of SDX Energy, commented:

"The third quarter of 2018 has been one of the best financial periods in the Company's history, with net revenues up 50% from the same quarter last year. This was achieved by a strong operational performance across our North African portfolio.

In Egypt, we have successfully completed a seven well workover programme at North West Gemsa and expect to achieve average field production of c.4,400 boe/d of light crude oil (SDX net: 2,200 boe/d), in line with Company guidance. At Meseda, the successful ongoing drilling and ESP replacement programmes puts us on track to meet our 2018 guidance of c.3,800 bbl/d of heavy crude oil (SDX net: 732 bbl/d). We made substantial progress at South Disouq during the quarter, and beyond, with a number of important operational milestones achieved including submitting the development lease application to the authorities and agreeing to a gas price of US$2.85/mcf. However, given important design updates to the central processing facility and the expected timing of obtaining final regulatory approvals, the Company now expects first production of 50-60 MMscf/d of conventional natural gas to be achieved at South Disouq during H1 2019.

In Morocco, the 240 km2 3D acquisition programme in the Gharb Centre permit has been successfully completed. The total cost for the project is expected to be in line with previous guidance, approximately US$6.0 million, with the acquired data now in the processing phase. In addition, we are very pleased that, with the gas sales contracts currently signed, we have achieved our previous guidance of 8-10 MMscf/d of conventional natural gas as at December 31, 2018. However, due to a delay in the start- up phase with one of these customers, our actual sales are likely to be just below 8 MMscf/d of conventional natural gas at year end.

We continue to see organic growth opportunities across our portfolio in addition to inorganic growth via acquisition or new licensing rounds that will enable us to enhance our scale and generate value for shareholders. We look forward to updating the market on these developments as appropriate."

KEY FINANCIAL & OPERATING HIGHLIGHTS

Unaudited interim consolidated financial statements with Management's Discussion and Analysis for Q3 2018 are now available on the Company's website at www.sdxenergy.com and on SEDAR at www.sedar.com.

About SDX

SDX is an international oil and gas exploration, production and development company, headquartered in London, England, UK, with a principal focus on North Africa. In Egypt, SDX has a working interest in two producing assets (50% North West Gemsa & 50% Meseda) located onshore in the Eastern Desert, adjacent to the Gulf of Suez. In Morocco, SDX has a 75% working interest in the Sebou concession situated in the Rharb Basin. These producing assets are characterised by exceptionally low operating costs making them particularly resilient in a low oil price environment. SDX's portfolio also includes high impact exploration opportunities in both Egypt and Morocco.

For further information, please see the website of the Company at www.sdxenergy.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 Paul Welch, Chief Executive Officer of SDX. Mr. Welch, who has over 30 years of experience, is the qualified person as defined in the London Stock Exchange's Guidance Note for Mining and Oil and Gas companies. Mr. Welch holds a BS and MS in Petroleum Engineering from the Colorado School of Mines in Golden, CO. USA and an MBA in Finance from SMU in Dallas, TX USA and is a member of the Society of Petroleum Engineers (SPE).

For further information:

Neither the TSX Venture Exchange nor its Regulation Services Provider (as such term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

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 Company's use of proceeds from the Facility; the timing of first gas at South Disouq; the Company's plans, production targets, volume targets, drilling, gas sales, production start-up dates, seismic work, testing and the timing and costs thereof; capital expenditures; operational expenditures; and the Company's outlook and corporate strategy, 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 labor and services.

All timing given in this announcement, unless stated otherwise is indicative and while the Company endeavors 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; 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 reference SDX's Management's Discussion & Analysis for the three and nine months ended September 30, 2018, which can be found on SDX's SEDAR profile at www.sedar.com, for a description of additional risks and uncertainties associated with SDX's business, including its exploration activities.

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. See Netback reconciliation to operating income/(loss) in note 20 to the Interim Consolidated Financial Statements.

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 of the financial statements 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. See EBITDAX reconciliation to operating income/(loss) in note 20 to the Interim Consolidated Financial Statements.

Oil and Gas Advisory

Certain disclosure in this news release constitute "anticipated results" for the purposes of National Instrument 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 and pay thickness attributable to the resources of the Company. Such estimates have been prepared by management of the Company 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" may be misleading, particularly if used in isolation. A "boe" conversion ratio of 6 Mcf: 1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.