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.

22 November 2019

SDX ENERGY PLC 

("SDX" or the "Company")

ANNOUNCES ITS FINANCIAL AND OPERATING RESULTS FOR THE THREE AND NINE MONTHS ENDED 30 SEPTEMBER 2019

SDX Energy Plc (AIM: SDX), the MENA-focused oil and gas company, announces its financial and operating results for the three and nine months ended 30 September 2019. All monetary values are expressed in United States dollars net to the Company unless otherwise stated.

Summary

Operations

·; Production for the nine months ended 30 September 2019 increased to 3,501 boe/d, net to SDX, compared with 3,455 boe/d for the same period in 2018. The increase was due to an 18% increase at Meseda as a result of successful drilling, a 20% increase in Morocco due to increases in customers and customer consumption rates, and offset by a 10% decrease at North West Gemsa primarily as a result of increased water cut across the field as previously announced.

·; On 7 November 2019, first gas was achieved from the South Disouq gas field in Egypt (SDX: 55% working interest and operator) with production increasing ahead of expectations from c.24 MMscfe/d to c.35 MMscfe/d in the first two weeks of operations.

Egypt

·; At South Disouq, the Company will continue to gradually ramp up production, targeting a gross plateau production rate of c.50 MMscfe/d in Q1 2020. During 2020, and subject to final partner discussions, the Company is planning to drill up to three exploration wells in the South Disouq concession.

·; At Meseda (SDX: 50% working interest, 19.06% entitlement interest and joint operator), the Company maintains its existing gross production guidance of 4,000-4,200 bbl/d following successful drilling of the Rabul-7 and Meseda-19 development wells in the first nine months of 2019.

·; At North West Gemsa (SDX: 50% working interest and non-operator), 2019 gross production guidance is maintained at 3,000-3,200 boe/d, with well workovers slowing the rate of natural field decline.

Morocco

·; On 25 October 2019, the Company announced the start of a 12-well drilling campaign, targeting a mean 15 bcf of gross unrisked prospective resources, in its operated Gharb Basin acreage in Morocco (SDX: 75% working interest).

·; The drilling campaign, which is expected to complete in Q1 2020, will target reserves sufficient to satisfy forecast demand based on existing customers and test new play opening areas of prospectivity across the portfolio.

·; Morocco gas customers added in late 2018 and early 2019 continue to increase consumption rates. Gross sales gas of 6.6 MMscf/d was achieved in the three months ended 30 September 2019, with this increasing to 7.0 MMscf/d for the month of October 2019. As a result, gross gas consumption for the nine months ended 30 September 2019 has increased to 6.2 MMscf/d, underpinning the 2019 sales guidance of an annual average gross rate of 6.0-6.5 MMscf/d.

Financial

·; Net revenues for the nine months ended 30 September 2019 of US$38 million are US$2 million (approximately 5%) lower than in the 2018 comparative period. This reduction in net revenues is due to lower net realised average oil/service fees of US$56/boe, compared to US$64/boe in 2018, which were offset by a small increase in production in the nine months ended 30 September 2019.

·; In the nine months ended 30 September 2019, the Company achieved a netback of US$27 million, US$4 million lower than the US$31 million achieved in the 2018 comparative period. This reduction was due to the US$2 million revenue reduction explained above and increased opex in the period, resulting from increased production and workover activity and a greater allocation of costs to opex in the nine months ended 30 September 2019. In the 2018 comparative period, these costs were allocated to capex and drilling campaigns in Morocco and North West Gemsa.

·; Operating cash flow before capex in the nine months ended 30 September 2019 remained robust at US$18 million (2018: US$27 million), which was due to the strong netback explained above and as a result of the continued reduction of Egyptian Petroleum Company ("EGPC") receivables in the period.

·; Operating cash flow supported US$23 million of capex invested in the period (2018: US$35 million). Of this US$23 million, US$14 million related to the South Disouq central processing facility ("CPF"), pipeline and well tie-ins and 3D seismic, US$5 million for drilling, customer connections, and 3D seismic in Morocco, US$2 million for workovers in Meseda and North West Gemsa, and US$2 million for drilling and completion costs at South Ramadan.

·; The Company's forecast drilling and development activities set out above are fully funded by expected future cash flows and the Company's existing sources of liquidity.

·; Cash at 30 September 2019 was US$13 million, with the US$10 million European Bank for Reconstruction and Development ("EBRD") credit facility remaining undrawn.

·; In line with its amortisation schedule, availability under the EBRD credit facility was reduced to US$7.5 million post-period end. Discussions are underway with the EBRD to extend the tenor and re-establish the US$10 million availability under the facility.

·;

Mark Reid, CEO of SDX, commented:

"Achieving first gas at South Disouq earlier this month was a major milestone for SDX and it is anticipated to have a material impact on the Company's cash generation going forward. Furthermore, we are pleased with the performance of the wells and the facility in the first two weeks of operation and this has resulted in a rate of production increase that has exceeded our expectations. Notwithstanding this accomplishment, we remain focused on the delivery of our other two medium-term strategic objectives of executing an efficient and successful 12-well drilling campaign in Morocco and progressing our planned exploration drilling campaign in South Disouq in 2020.

We are also pleased to report that production and capex from our operations continue to be within our guided ranges and our cashflow generation, liquidity position, and balance sheet remain strong and continue to provide us with the necessary funding to pursue these remaining two medium-term strategic objectives.

With the planned ramp-up of production in South Disouq to 50 MMscfe/d in Q1 2020, together with the drilling campaigns in Morocco and South Disouq, the remainder of 2019 and 2020 will be a very busy and exciting period for SDX and we look forward to providing the market with further updates in due course."

Corporate and financial

·; SDX's key financial metrics for the three and nine months ended 30 September 2019 and 2018 are: 

Note:

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

(2) EBITDAX for each period presented includes 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 (Q3 2019: US$0.8 million, Q3 2018: US$1.5 million, nine months ended 30 September 2019: US$2.7 million, nine months ended 30 September 2018: US$3.7 million)

·; SDX reported a breakeven comprehensive income position for the nine months ended 30 September 2019 and the main components of this are:

o US$27.5 million netback;

o US$18.4 million of DD&A;

o US$4.3 million of G&A; and

o US$1.1 million of transaction costs covering the re-domicile of the Company from Canada to the UK, the Company's capital reduction to improve our ability to pay dividends, and other business development activities.

·; Netback of US$27.5 million for the nine months ended 30 September 2019 was down from US$31.3 million for the nine months ended 30 September 2018. This decrease has mainly been driven by an 11% reduction in realised average oil prices in Egypt to US$56.44/bbl from US$63.69/bbl, a 10% reduction in North West Gemsa production, higher opex resulting from increased workover activity in the nine months ended 30 September 2019, and a greater allocation of costs to opex in the period. These costs were allocated to capex and drilling campaigns in Morocco and North West Gemsa in 2018. These factors were partly offset by increased production at Meseda and in Morocco.

·; The cash position of US$12.6 million as at 30 September 2019 is US$1.4 million higher than the US$11.2m as at 30 June 2019 and US$4.7 million lower than the US$17.3 million as at 31 December 2018.

·; The main components of the cash movement for the nine months ended 30 September 2019 are: operating cash flows of US$19.3 million, which includes a US$1.3 million improvement in working capital, predominantly the result of a continued reduction in Egyptian receivables, an Egyptian corporation tax payment of US$1.3 million, and the US$22.8 million capital investment programme discussed below. The Company's three-year, US$10.0 million credit facility, established in July 2018 with the EBRD, remains undrawn. The amount available under this facility was reduced to US$7.5 million post-period end, in line with the facility's amortisation schedule, and discussions are underway with the EBRD to extend the tenor and re-establish the US$10.0 million availability under the facility.

·; US$22.8 million of capital expenditure has been invested into the business during the nine months ended 30 September 2019. This comprised:

o US$14.3 million for the South Disouq development, comprising US$11.5 million for the CPF, pipeline and well tie-ins, and US$2.8 million for the 170km2 3D seismic programme;

o US$1.0 million in North West Gemsa for the ongoing well workover programme;

o US$1.2 million in Meseda for the ongoing pump replacement programme, well recompletions, and converting a depleted well into a water injection well

o US$1.8 million in South Ramadan for the SRM-3 well and development project, the results of which are currently being assessed; and

o US$4.5 million in Morocco, comprising US$2.3 million for customer connections, facilities and studies, US$1.8 million for the current drilling campaign and US$0.4 million relating to the 240km2 3D seismic programme in Gharb Centre.

·; Trade and other receivables have been reduced to US$18.5 million as at 30 September 2019, down from US$24.3 million as at 31 December 2018. This reduction is predominantly a result of the continued recovery of trade receivables, which were due from the Egyptian State and which were offset against costs owing to Egyptian State contractors used on the South Disouq development project.

·; Post-period end, the Company has collected a further US$5.3 million of trade receivables, of which US$4.2 million was collected from EGPC, and US$1.1 million was collected from third-party gas customers in Morocco. Out of the US$4.2 million collected from EGPC, US$2.0 million was in cash and US$2.2 million was offset against South Disouq development costs and amounts owing to joint venture partners.

Operational highlights

·; The Company's entitlement share of production from its operations for the nine months ended 30 September 2019 was 3,501 boe/d (gross - 9,130 boe/d) split as follows:

o North West Gemsa 1,915 boe/d (gross - 3,830 boe/d)

o Meseda 814 bbl/d (gross - 4,271 bbl/d)

o Morocco 772 boe/d (gross - 1,029 boe/d)

Egypt

·; In the South Disouq concession, the Company was awarded a 25-year development lease on 1 July 2019 covering the Ibn Yunus development area, which together with the 25-year South Disouq development lease granted on 2 January 2019, comprises the South Disouq development project. Gas sales agreements with pricing of US$2.85/Mcf have been signed for both development leases.

·; First gas was achieved from the South Disouq gas field on 7 November 2019. In the two weeks since first gas, production has increased from c.24 MMscfe/d to c.35 MMscfe/d. The Company will continue to gradually ramp up production, targeting a gross plateau production rate of c.50 MMscfe/d in Q1 2020.

·; Completed interpretation of the 170 km2 3D seismic survey acquired in February 2019 and the reprocessed 300 km2 3D seismic data acquired in 2016.

·; During 2020, and subject to final partner discussions, the Company intends to drill up to three exploration wells in the South Disouq concession. Two of these wells will be targeting Kafr el Sheikh and Abu Madi prospectivity that is similar in nature to the nearby reserves currently being produced through the South Disouq processing facility. The third well will seek to test a deeper and larger prospect within the Cretaceous horizon in the block. Success with this Cretaceous well could open up an exciting new play fairway for the Company.

·; In Meseda, in the nine months ended 30 September 2019, the Company successfully completed the Rabul-7 and Meseda-19 development wells with these wells each contributing c.300-400 bbl/d gross to production. In addition, the Company completed workovers of eight wells with one workover still ongoing. This workover activity covered pump replacements, recompletions in different horizons and converting a now depleted well into a water injector. The above activities were all part of the 2019 budgeted capital expenditure programme supporting the 2019 annual production guidance of 4,000-4,200 bbl/d.

·; In North West Gemsa, seven workovers were carried out in the nine months ended 30 September 2019. The workover activity covered pump and completion string replacements.

·; At South Ramadan (SDX: 12.75% working interest and non-operator), the SRM-3 appraisal well was spud on 14 June 2018 and reached a target depth of 15,635 feet. The operator reported encountering 75 feet of net conventional oil pay in the Matulla section (primary target), 20 feet of net conventional oil pay in the Brown Limestone formation, and a further 15 feet of net conventional oil pay in the Sudr section. The well was completed and operations continue on the flowline upgrade/replacement so that the well can be flow-tested. Based on the results of the flow-test, the Company will decide how best to optimise its position in the licence.

Morocco

·; The Company's Moroccan acreage (SDX 75% working interest and operator) consists of five concessions, all of which are located in the Gharb Basin in northern Morocco: Sebou, Lalla Mimouna Nord, Gharb Centre, Lalla Mimouna Sud, and Moulay Bouchta Ouest, with the latter two secured by the Company during H1 2019.

·; In 2018, the Company began selling natural gas to the following new customers: Peugeot, Extralait, and GPC Kenitra. During H1 2019, natural gas sales began to three additional customers: Setexam, Citic Dicastal, and Plastic Omnium.

·; The three new customers added in H1 2019, particularly Citic Dicastal, have been increasing their consumption rates during Q3 2019 with gross sales gas of 6.6 MMscf/d achieved in the three months ended 30 September 2019. This consumption increased to 7.0 MMscf/d for the month of October 2019. The increase means that gross gas sales for the nine months ended 30 September 2019 have increased to 6.2MMscf/d, a 19% increase from the 2018 rate of 5.2MMscf/d. As such, the Company is maintaining its 2019 sales guidance of an annual average gross rate of 6.0-6.5 MMscf/d.

·; The Moulay Bouchta Ouest exploration concession has been awarded to SDX for a period of eight years, with a commitment to reprocess 150 km of 2D seismic data, acquire 100 km2 of new 3D seismic, and drill one exploration well within the first three-and-a-half-year period.

·; The Lalla Mimouna Sud exploration concession has been re-awarded to SDX for a period of eight years, with a commitment to acquire 50 km2 of 3D seismic and drill one exploration well within the first three-year period.

·; None of these commitments are expected to require funding in the next 12 months.

2019 production and Capex guidance:

·; The Company's nine months' production to 30 September 2019, FY19 production guidance, and FY19 capex guidance are shown below:

·; Capex guidance is unchanged and comprises:

o North West Gemsa: US$4.0 million (US$2.0 million net to SDX) consisting of up to 10 well workovers and infrastructure maintenance.

o Meseda: US$5.4 million (US$2.7 million net to SDX) for two development wells, pump replacements, well workovers, and facilities upgrades.

o South Disouq: US$35.5 million (US$19.5 million net to SDX). Of the Company's share, approximately US$17.0 million relates to South Disouq development activities and US$2.5 million relates to long lead items and drilling preparations for two of the three potential exploration wells planned in 2020. To date in 2019, the Company has offset US$14.7 million of its accounts receivable due from the EGPC against costs incurred with Egyptian State contractors on the South Disouq development. The Company expects to use future accounts receivable offsets amounting to US$2.9 million to fund its remaining US$2.9 million share of capex to first gas. Post-period end, each of these figures has reduced to US$1.7 million.

o Morocco: US$14.0 million (US$12.0 million net to SDX). Out of this US$12.0 million, US$3.4 million relates to long lead items for the 12 wells and US$6.0 million relates to the drilling costs for up to four wells expected to be drilled by the end of 2019. The remaining US$2.6 million relates to the Company's share of facilities and field maintenance capex.

Corporate

·; SDX remains fully funded for all existing and planned activities.

·; Discussions have begun with the EBRD to extend the tenor and availability of the US$10 million undrawn credit facility, the availability of which, as at 31 October 2019, has reduced to US$7.5 million in the line with the existing facility repayment schedule.

·; The corporate reorganisation was completed in May 2019, with re-domiciliation from Canada to the UK and delisting from TSX-V.

·; A capital reduction exercise was completed in June 2019 to improve the ability to pay dividends in the future when the Company deems it prudent to do so.

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

KEY FINANCIAL & OPERATING HIGHLIGHTS

Unaudited interim condensed consolidated financial statements with Management's Discussion and Analysis for the three and nine months ended 30 September 2019 are now available on the Company's website at www.sdxenergy.com and on SEDAR at www.sedar.com.

(1) Refer to the "Non-IFRS Measures" section of this release below and the Company's MD&A for the three and nine months ended 30 September 2019 and 2018 for details of netback and EBITDAX.

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 three producing assets: a 55% operated interest in the South Disouq gas field in the Nile Delta and a 50% non-operated interest in each of the North West Gemsa and Meseda concessions, which are 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 Gharb Basin. The producing assets in Morocco 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 Company's website 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 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:

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 intention to increase production at South Disouq, the expected impact on cash flows, other production targets, future drilling, pump replacement, field facility upgrades, well workovers, and the timing and costs thereof, as well as capital expenditures, operational expenditures, the reduction in Egyptian receivables, prospective opportunities, business development activity, and extending the tenor and availability of the US$10 million credit facility with the EBRD 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 SDX's Management's Discussion & Analysis for the three and nine months ended 30 September 2019, 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 recognised 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 analyse 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 the Company's Interim Consolidated Financial Statements for the three and nine months ended 30 September 2019 and 2018.

EBITDAX is a non-IFRS measure that represents earnings before interest, tax, depreciation, amortisation, exploration expense, and impairment. EBITDAX is calculated by taking operating income/(loss), adjusted for the add-back of depreciation and amortisation, 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, amortisation, and impairments. EBITDAX may not be comparable to similar measures used by other companies. See EBITDAX reconciliation to operating income/(loss) in the Company's Interim Consolidated Financial Statements for the three and nine months ended 30 September 2019 and 2018.

Oil and Gas Advisory

Estimates of reserves have been made, assuming the development of each property in which the estimate is made will actually occur, without regard to the likely availability to the Company of funding required for the development of such reserves.

Certain disclosures in this news release constitute "anticipated results" for the purposes of National Instrument 51-101 - Standards for Oil and Gas Activities 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.

Prospective Resources

The prospective resource estimates disclosed herein have been prepared by an independent qualified reserves evaluator, ERC Equipoise Limited, in accordance with the Canadian Oil and Gas Evaluation Handbook. The prospective resources disclosed herein have an effective date of 1 January 2019. 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%. Anticipated results are subject to certain risks and uncertainties, including 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.

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.

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 1bbl: 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.