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Despite our last published FY19 forecasts reflecting a more conservative production ramp-up than management guidance, SDX’s guidance revisions have resulted in a further downgrade to our short-term cash flow forecasts and NAV. We reduce FY19e production from 4.3kboed to 3.4kboed (-21%) and project more moderate growth in SDX’s Morocco gas demand with an associated RENAV impact of -42%. Key drivers of management’s downgrade include lower Sebou gas demand growth, a higher than anticipated water cut at North West Gemsa and a delay to production ramp-up at South Disouq. Our valuation falls from RENAV 86.5p/share to 49.8p/share (-42%), while our core NAV (producing assets and South Disouq) falls from 70.1p/share to 45.0p/share (-36%). Based on our latest estimates, we expect SDX to end FY19 with c $4.9m of net cash on the balance sheet.
1Q19 production was 3.7 mboe/d (GMP FEe: 3.4 mboe/d). NW Gemsa was 2.1 mboe/d (GMP FEe: 1.8 mboe/d), Meseda was 826 bbl/d (GMP FEe: 848 bbl/d) and Morocco was 761 boe/d (GMP FEe: 763 boe/d).
Block Energy (BLOE): Result of £12 million Placing | Cairn Energy (CNE): AGM Statement | Falcon Oil & Gas (FOG): Proposed $10 million Placing | Lekoil (LEK): Resignation of CFO | Ophir Energy (OPHR): Sale of Mexico licence | SDX Energy (SDX): Q1 Results | UK Oil & Gas (UKOG): Production Test Update
Madalena Energy (MVN CN) (not covered): 1Q19 update in Argentina | Falcon Oil & Gas (FOG LN) (not covered): Equity raise for Australia | SDX Energy (SDX LN/CN)1,6: 1Q19 Results
In this note, we update our short-term forecasts and NAV to reflect delays at South Disouq, with first gas postponed from mid-2019 to the end of 2019. Management is confident that first gas will be delivered in Q419, with the pipeline infrastructure largely installed. SDX retains the option to deliver first gas ahead of Q419 through a leased early production facility (EPF), but only a short window exists for this to be commercially viable ahead of the completion of the permanent central gas processing facility (CPF). Conservatively, we assume first gas at the end of 2019, a six-month delay to our previous forecasts. The impact of the South Disouq delay on NAV is small at -3%, as production is deferred, although there is a material impact on FY19 cash flow expectations (CFO -20%). However, the combined impact of the South Disouq delay and lower forecast Moroccan and NW Gemsa volumes reduce our RENAV by c 13% to 86.5p/share. We expect SDX Energy to end the year with $11m in cash and no debt ($10m undrawn). Delays are unlikely to have a knock-on effect on the company’s committed eight- to nine-well H219 exploration programme.
SDX Energy released its final results on 22 March. The company reported net income in 2018 of US$0.1 million which was lower than expected due to an exploration expense and an impairment whilst the underlying performance was in line with expectations. After a quiet end to the year, the company is now gearing up to start an exciting exploration programme in both Morocco and Egypt in the second half of 2019 which has the potential of adding significant reserves and resources.
SDX is looking to delist its shares from the TSX by 27/05/2019. South Disouq start-up date of mid 2019 is contingent of an EPF being leased until the main central gas processing facility is completed in 4Q19 (current expectations). The financial terms for the EPF lease have not been agreed yet. Without an agreement, first gas could be delayed until 4Q19.
Ascent Resources (AST LN) (not covered) | Carlyle buys a stake in Cepsa | Volga Gas (VGAS LN) (not covered): FY18 results | SDX Energy (SDX LN/CN)1,6; BUY; £0.65 – Delisting from the TSX and potential delays at South Disouq | Orca Exploration (ORC.A/B CN) (not covered): Reserves update in Tanzania | Tlou Energy (TLOU LN) (not covered): New equity issue for Southern Africa
Ophir Energy (OPHR LN); HOLD, £0.55: Medco offer accepted | Exillon Energy (EXI LN) (not covered): February production in Russia | Nostrum Oil & Gas (NOG LN)6; Speculative Buy, £2.20: 4Q18 results | SDX Energy (SDX LN/CN)1,6: BUY, £0.65; Transferring coverage
Canacol Energy (CNE CN)/ConocoPhillips (COP US) (not covered): Colombia fracking licences denied | Canacol Energy (CNE CN) (not covered): 4Q18 results | Murphy Oil (MUR US) (not covered): Divestment of Malaysia assets | EnQuest (ENQ LN); HOLD, £0.25: Kraken reserves downgrade or not? | i3 Energy (I3E LN)1 ; Speculative Buy, £1.80: Operating update in the UK | Serinus Energy (SENX LN)1 ; Speculative Buy, £0.20: Pathway clear to first gas in Romania | SDX Energy (SDX LN/CN)1,6: BUY, £0.65; 2018 results | Tethys Oil (TETYSS)1,6; HOLD, SEK85: Production update in Oman
SDX has been awarded the 458 km2 Moulay Bouchta Ouest (SDX 75%, op) exploration licence for 8 years. It has a commitment to reprocess 150 km of 2D seismic, acquire 100 km2 of new 3D seismic and drill one exploration well within the first three-anda-half-years. SDX has also been re-awarded the 857 km2 Lalla Mimouna Sud licence (SDX 75%, op) for 8 years with a commitment to acquire 50 km2 of 3D seismic and drill one exploration well within the first three-year period. The concession expired after all the work commitments had been fulfilled and SDX reapplied for the acreage after the acquisition of additional 3D seismic in the area.
ExxonMobil (XOM US) (not covered): New oil discoveries in Guyana | Cuadrilla Resources: Shale Gas initial flow test results | Total (FP FP) (not covered): 4Q18 results | United Oil & Gas (UOG LN) (not covered): CPR for Selva Gas Field, Onshore Italy | Genel Energy (GENL LN); Speculative Buy, £3.00: Update in Kurdistan | SDX Energy (SDX LN/CN)1,6: BUY, £0.65: SDX expands presence in Morocco | Africa Oil (AOI CN/SS): BUY, C$2.20; Discovery offshore South Africa
SDX Energy has released an operations and corporate update. We think that everything is progressing well and, after a relatively quiet end to the year, the Company has acquired additional seismic data which has identified additional prospects. It is now gearing up to start two exciting exploration programmes in Morocco and Egypt in 2019 which have the potential of adding significant reserves and resources.
Cabot Energy (CAB LN)1; Speculative Buy, £0.06: Corporate Update | Pan Orient Energy (POE LN): Reserves update in Thailand | ConocoPhillips (COP US): Ceases North Sea talks with Ineos | Panoro Energy (PEN NO) (not covered): Tunisia update | SDX Energy (SDX LN/CN)1,6: BUY, £0.65; South Disouq resumes centre stage
SDX has produced its 2019 production and capex guidance with South Disouq (55%WI, Op) resuming its position as the most material source of growth this year. In Egypt, at South Disouq, SDX targets first gas in mid-2019 with a plateau gross production of 50 – 60 mmcf/d and overall net capex of c. US$22 mm for development and exploration. At the Meseda concession (SDX 19.25%), 2019 gross production guidance is c. 4.0 – 4.2 mbbl/d and net capex guidance is c. US$4 mm. At NW Gemsa (50%WI), 2019 gross production guidance is 3.4 – 3.6 mboe/d, costing SDX only c. US$2 mm. In Morocco (75%WI, Op), 2019 gross production is 9 – 11 mmcf/d and net capex guidance is c. US$8 mm. Although overall 2019 production guidance is more conservative than what we were carrying, we have a BUY recommendation and £0.65/sh target price which is over 60% above the current share price.
In Morocco (75%WI, Op), SDX plans a 12 well campaign from 3Q/4Q19 to 1H19. The LNB-1 and LMS-1 wells in Lalla Mimouna will be re-tested, with the remainder of the targets coming from the recently acquired Gharb Centre 3D seismic. SDX anticipates that three of the wells will be completed and connected in 2019 and net 2019 capex will be c. US$8 mm with US$6 mm relating to the wells and US$2 mm to maintenance capex. SDX is targeting gross production of 9-11 mmcf/d.
Jadestone Energy (JSE LN/CN): BUY, £0.50; Montara production update in Australia | Lundin Petroleum (LUPE SS) (not covered): Acquisition in Norway | Valeura Energy (VLE CN)1,6 ; BUY, C$10.00: Drilling results in Turkey | SDX Energy (SDX LN/CN)1,6: BUY, £0.70; Operating update & 2019 outlook in Egypt & Morocco | Tethys Oil (TETY SS)1,6; HOLD, SEK85: Partner pre-emption rights exercised in Block 53 transaction in Oman
The SRM-3 well at South Ramadan (SDX WI: 12.75%) encountered 75 ft of net conventional oil pay in the Matulla section (primary target), 20 ft in the Brown Limestone formation and 15 ft in the Sudr section. The well will be completed in the Matulla section and then tested to establish whether the well will flow at a commercial rate.
Parex Resources (PXT CN); BUY, C$27.00: Andina-2 tests combined 3,800 bbl/d | Ophir Energy (OPHR LN): £0.55, HOLD; Rejection of Medco’s latest possible offer | Faroe Petroleum (FPM LN); TENDER, £1.60: Drilling update at Brasse | Lundin Petroleum (LUPE SS): Increased reserves and contingent resources | OMV (OMV AG) (not covered): 4Q18 trading update | ENI (ENI IM) (not covered): Transactions in the UAE | SDX Energy (SDX LN/CN)1,6: Update in Egypt
2019 will be an active year for SDX with H119 focused on delivery of first gas at South Disouq, ahead of a return to the drill bit in H219. An eight to nine well programme targets both oil and gas prospectivity in Egypt and appraisal/development locations in Morocco. Drilling activity is expected to be financed through cash flow, undrawn debt ($10m accessible under a reserve-based facility) and an estimated end-FY18 cash position of $15.9m. We expect first gas from South Disouq and increased gas production in Morocco to provide cash flow to support a FY19 capital programme of an estimated US$38m. Our updated risked valuation stands at 99.6p/share (up from 92.7p/share, driven by FX and roll forward of NAV), but we drop our sales and cash flow forecasts for FY19 – a key driver being deferred gas sales in Morocco and a later start-up at South Disouq. Morocco and South Disouq combined make up 67% of our core valuation with contracted sale volumes not levered to the oil price.
SDX has announced strong Q3 2018 earnings with a netback achieved of US$12.0 million compared to US$7.5 million a year earlier as it benefitted from higher production and higher realised oil and gas prices. The balance sheet remains strong despite the high level of spend with net cash of US$18.7 million at the end of the quarter. We have updated our DD&A estimate based upon the Q3’18 results and this has resulted in our 2018 net income estimate being revised down to c.US$7.7 million. This revision will not affect the more important cash flow estimate and valuation of the business. We note, however, that our FY 2019E estimates will have to be reviewed further given some slight slippage in the start of production in South Disouq. We will adjust these numbers once we have a clearer idea of start up.
Faroe Petroleum (FPM LN)6 ; BUY, £2.10: DNO makes hostile £1.52 per share cash offer; probably too low | Serinus Energy (SENX LN)1 ; BUY, £0.25: First gas in Romania delayed | Petro Matad (MATD LN) (not covered) | SDX Energy (SDX LN/CN)1,6: BUY, £0.80; 3Q18 results
Overall net production over the first 9 months of 2018 was 3,889 boe/d (GMP FEe: c. 3.6 mboe/d). This includes 2,472 boe /d at Gemsa (GMP FEe: 2.2 mboe/d), 802 bbl/d at Meseda (GMP FEe: 728 bbl/d) and 662 boe/d in Morocco (GMP FEe: 692 boe/d).
Royal Dutch Shell (RDSA/B LN) (not covered) & Noreco (NOR NO) (not covered): Sale of Danish assets | Serinus Energy (SENX LN)1: Speculative Buy, £0.35: Operations update | UK Oil & Gas (UKOG LN) (not covered): Horse Hill Portland considered commercial | SDX Energy (SDX LN/CN)1,6: BUY, £0.80: Update on potential acquisition | Tethys Oil (TETY SS)1,6; HOLD, SEK100: Production update in Oman
Jadestone Energy (JSE LN/CN): BUY, £0.70; Montara Acquisition completion update | Verus acquires assets in the UK | Regal Petroleum (RPT LN) (not covered): 1H18 results | SDX Energy (SDX LN/CN)1,6: BUY, £0.80; Potential acquisition in Egypt | Savannah Petroleum (SAVP LN) (not covered): Seven Energy transaction update in Nigeria | Tower Resources (TRP LN) (not covered): Prospective resources in South Africa
The acquisition of Circle Oil assets, strong oil prices and cost discipline drove up group operational netbacks from US$22.5/boe in H117 to US$32.9/boe in H118, with the group generating net cash from operations of US$20.3m. Funds from operations helped SDX Energy to support an active H118 drilling programme while maintaining a strong balance sheet position, ending the half-year with US$25.2m of cash and an undrawn credit facility of US$10m. As highlighted in our recent research note, Looking ahead at 2019 work programme, SDX remains on track to double production in 2018, while investing in an active E&A programme and development drilling in both Egypt and Morocco. Our valuation remains broadly unchanged at 92.7p/share (from 92.5p/share) as we include a slightly higher capex estimate for delivery of first gas at South Disouq.
End 2Q18 cash was c. US$25mm (GMP FEe: c. US$26 mm) with no debt. Overall 1H18 production was c. 3.2 mboe/d (GMP FEe: 3.1 mboe/d), consisting of 1.9 mboe/d from NW Gemsa in Egypt (GMP FEe: 1.8 mboe/d), 633 bbl/d from Meseda in Egypt (GMP FEe: 643 bbl/d) and 660 boe/d from Morocco (GMP FEe: 676 boe/d).
Jadestone Energy (JSE LN/CN); BUY, £0.70: 2Q18 results | Faroe Petroleum (FPM LN); BUY, £1.80 & DNO (DNO NO) (not covered): DNO Withdraws Faroe general meeting requisition | Lundin Petroleum (LUPE SS) (not covered): Johan Sverdrup update in Norway & production test on Rolvsnes | Serinus Energy (SENX LN)1 ; Speculative Buy, £0.35: Moftinu - 1003 well in Romania | Petroneft Resources (PTR LN) (not covered): C-4 well in Russia | SDX Energy (SDX LN/CN)1,6: BUY, £0.80; 2Q18 results
Independent Oil & Gas (IOG LN) (not covered): Funding for Harvey well in the UK North Sea | SDX Energy (SDX LN/CN)1,6; BUY, £0.80: SD-3X flow test in Egypt | Victoria Oil & Gas (VOG LN)1,6; Speculative Buy, £0.85: 2Q18 update |
Path Investments (PATH) -RTO of a 50 per cent. participating interest in the producing Alfeld-Elze II gas field located 22 kilometres south of Hannover in Germany. Offer TBA. Due late Aug. Kropz PLC-Intention to float by the emerging plant nutrient producer with an advanced stage phosphate mining project in South Africa and exploration assets in West Africa
The SD-3X well in the South Disouq Concession, Egypt (SDX 55%WI, op) encountered 32.6 ft of net gas pay in the Abu Madi and Kafr el Sheik horizons, with 21.7% porosity. It will now be completed in the Abu Madi horizon and then tested before the well is re-entered to complete and produce the Kafr el Sheik horizon.
Cabot Energy (CAB LN)1 : Speculative Buy, £0.10; 2Q18 operational update | Trinity Exploration & Production (TRIN LN) (not covered): 2Q18 operational update in Trinidad &Tobago | SDX Energy (SDX LN/CN)1,6: BUY, £0.80; Gas discovery at SD-3X well, Egypt
On completion of the upcoming SD-3X well in Egypt, SDX Energy will have completed successful drilling campaigns in both Egypt and Morocco. We believe that there will be a pause in the frenetic activity seen over the last twelve month as management evaluates the results and moves ahead to acquire further 3D seismic data in order to put in place another exciting drilling campaign in 2019 and maintain the momentum.
SDX Energy (SDX LN/CN)1,6 ; BUY, £0.80: US$10 mm credit facility signing | Tullow Oil (TLW LN); REDUCE, £2.10: Negative arbitration results against Kosmos Energy (KOS LN/US) (not covered)
The SD-4X well flowed at a maximum stabilized flow rate of 30.4 mmcf/d on a 50/64” choke.
Zenith Energy (ZEN LN) (not covered): No deal in Indonesia | SDX Energy (SDX LN/CN)1,6; BUY, £0.80: Well test results in Egypt
Chevron (CVX US) (not covered): Looking to sell the UK | JKX Oil & Gas (JKX LN) (not covered): Trading update in the Ukraine and Russia | Rockhopper Exploration (RKH LN) (not covered): Operational update in Egypt | SDX Energy (SDX LN)1,6; BUY, £0.80: Appraisal well spudded in Egypt
Ovoca Gold (to be renamed Ovoca Bio PLC) - RTO of IVIX, a Russian company developing a drug candidate for the treatment of female sexual dysfunctions. No monies to be raised, market cap of £8.5m, due 30 July Nucleus Financial—independent wrap platform provider . FYDec17 revs £40.36m and PBT of £5.1m. Offer TBA. Due late July. Kropz PLC-Intention to float by the emerging plant nutrient producer with an advanced stage phosphate mining project in South Africa and exploration assets in West Africa Immotion Group - aims to become the market leader in "out of home" Immersive Entertainment Experiences. Offer TBA. Due 12 July Strongbow Exploration (TSX:SBW) intends to dual list on AIM. Holds rights to the South Crofty underground tin mine, a former producing tin mine located in the towns of Pool and Camborne, Cornwall . The project is estimated to require the Company to raise £25 million over the next 18 months to progress to a production decision. Offer TBS. Due June.
In this note, we revisit SDX’s 2017/2018 gas discoveries in Morocco and Egypt and look ahead at the company’s plans to leverage this success to deepen its resource base. In 2019, drilling in Egypt will focus on several Ibn Yunus lookalikes with combined unrisked recoverable volume of c 70bcf and a 17bcf Abu Madi structural trap. In addition, SDX will target a 50mmbo unrisked oil prospect in 2019. In Morocco, SDX has a commendable 87% success rate of discovering gas at Sebou based on calibrated 3D seismic; 2019 targets include 20bcf of gross unrisked resource adding gas-behind-pipe in order to meet anticipated demand growth. Our updated valuation includes planned exploration, appraisal and development activity for 2019 and higher short-term oil price expectations, with valuation rising from 65.6p/share to 92.5p/share (+41%).
SDX has provided further details on its South Disouq and Moroccan assets ahead of its analyst meeting today. Based on SD-1X and Ibn Yunus-1X results, SDX is targeting the development of at least 100 bcf gross of gas and 1 mmbbl of condensate with plateau production of c.55-60 mmcf/d and c.500-600 bbl/d of condensate for the first four years.
Echo Energy (ECHO LN) (not covered): Hydrocarbon column at EMS-1001 in Argentina | Hess (HES US) (not covered): Discovery in Guyana | ENI (ENI IM) (not covered): Croatia upstream divestment | Royal Dutch Shell (RDSA/B LN) (not covered): Shell to sell Draugen and Gjøa interests to OKEA | Zenith Energy (ZEN LN) (not covered): Equity placing | Oryx Petroleum (OXC CN); Under Review: Successful appraisal in Kurdistan | ShaMaran (SNM CN) (not covered): Payment for Kurdish export | SDX Energy (SDX LN/CN)1,6: BUY, £0.80; South Disouq and Morocco update
The SD-4X well at South Disouq encountered 89 ft of net gas pay in the Abu Madi horizon, with average porosity of 24%.
President Energy (PPC LN) (not covered): Operation update in Argentina | SDX Energy (SDX CN/LN): BUY, £0.80; SD-4X well, Egypt, & LMS-1 Well, Morocco
Petro Matad (MATD LN) (not covered): Results of placing | Cairn Energy (CNE LN); BUY, £2.60: Farm in in UK asset | SDX Energy (SDX LN/CN)1,6: BUY, £0.80: South Ramadan appraisal well spud, Egypt | Eland Oil & Gas (ELA LN) (not covered): Opuama-9 update in Nigeria | Victoria Oil & Gas (VOG LN)1,6; Speculative Buy, £0.85: Restructuring of debt facility
Egdon Resources (EDR LN) (not covered) & Union Jack (UJO LN) (not covered): Acquisition in the UK | Reabold Resources (RBD LN) (not covered): Resources estimates in the UK North Sea | SDX Energy (SDX LN/CN)1,6; BUY, £0.80: Well spudded in Egypt | Sound Energy (SOU LN) (not covered): Resources estimates in Morocco | Lekoil (LEK LN) (not covered): FY17 results | Victoria Oil & Gas (VOG LN)1,6; Speculative Buy, £0.85: Material reserves increase
The sands at the Kelvin-1X exploration well at South Disouq, (SDX 55%, op) had low gas saturation and were not deemed commercial. The Kelvin-1X well was located structurally updip of the SD-1X discovery and thought to potentially be connected to the original SD-1X structure by a continuous gas bearing section.
Jadestone Energy (JSE CN); Speculative Buy, C$1.00: Update on new contract for Ogan Komering, Indonesia | Frontera Resources (FRR LN) (not covered): Operating update in Georgia | Nostrum Oil & Gas (NOG LN)6; BUY, £4.50: 1Q18 results & production guidance reduction | Serinus Energy (SENX LN/SEN CN)1: Speculative Buy, £0.25; Moftinu–1007 well spud in Romania | Zoltav Resources (ZOL LN) (not covered): Final results | SDX Energy (SDX LN/CN)1,6: BUY, £0.80; Kelvin-1X exploration well result, Egypt
The Ibn Yunus 1X well has flowed at a stabilised rate of 39.3 mmcf/d of gas on a 32/64” choke, exceeding initial expectations. It was limited by the surface facilities. The well has been shut in for an initial build-up after which a series of additional flowing periods will be conducted and fluid samples taken.
Echo Energy (ECHO LN) (not covered): Gas discovery at ELM-1004 | SDX Energy (SDX LN/CN)1,6: BUY, £0.80; Excellent Ibn Yunus-1X flow test in Egypt | Anglo African Oil & Gas (AAOG LN) (not covered): £7.4 mm Placing | BP (BP LN) (not covered): Potential asset swap in the UK
Sterling Resources (SLG CN) (not covered): Operations update in Peru | La Francaise de l’Energie (LFDE FP)6 ; Speculative Buy, EUR40.00: 1Q18 revenue | Genel Energy (GENL LN); REDUCE, £1.80: Kurdistan update | SDX Energy (SDX LN/CN)1,6: BUY, £0.80; 1Q18 results | Total (FP FP) (not covered): Withdrawal from Iran project
End 1Q18 cash was c. US$29mm mm (GMP FEe: c. US$26 mm) with no debt. Overall 1Q18 production was c. 3.0 mboe/d (GMP FEe: 3.6 mboe/d). 1.8 mboe/d was from NW Gemsa in Egypt (GMP FEe: 2.1 mboe/d). 558 bbl/d was from Meseda in Egypt (GMP FEe: 660 bbl/d). 664 boe/d was from Morocco (GMP FEe: 750 boe/d).
Valeura Energy (VLE CN)1,6; BUY, C$11.50: Program to appraise and de-risk the basin centered natural gas accumulation on track | Urals Energy (UEN LN) (not covered): YE17 reserves & resources CPR | SDX Energy (SDX LN/CN): BUY, £0.80; Private investor call | TransGlobe Energy (TGL CN); BUY, C$3.75: 1Q18 results and potentially meaningful exploration drilling upcoming | Africa Oil (AOI CN/SS): BUY, C$2.20; 1Q18 results |
Trinity Exploration & Production (TRIN LN) (not covered): FY17 results | Parex Resources (PXT CN)6,8; BUY, C$31.00: 1Q18 results and increasing cash flow outlook | La Francaise de l'Energie (LFDE FP): Speculative Buy, €40; Loan secured | Providence Resources (PVR LN) (not covered): 2017 results in Ireland | SDX Energy (SDX LN/CN)1,6; BUY, £0.80: LMS-1 completes successful drilling campaign in Morocco | ShaMaran Petroleum (SNM CN/SS) (not covered): 1Q18 results | San Leon Energy (SLE LN) (not covered): Comment on news article in Nigeria |
The LMS-1 well at Lalla Minouma (SDX WI: 75%) encountered 16.4 m net gas pay in high quality sands (32% porosity) in an over-pressured section in the H-9 sequence that had not been previously tested in the area. In addition, the cuttings showed evidence of fluorescence indicating the potential presence of liquid hydrocarbons. This completes a drilling campaign in Morocco comprising of seven successes out of nine wells or a 78% rate of success. We have assumed the discovery is around half of the recent 10.2 bcf LNB-1 well in Morocco. Given very high netbacks and low government take, Moroccan barrels are very valuable. As a result, we have increased our target price to £0.80/sh and maintain our BUY recommendation.
Total (FP FP) (not covered): no biogenic formation in Foz de Amazonas in Brazil | Ophir Energy (OPHR LN); HOLD, £0.70: Good strategic move but limited value creation | Aker BP (AKERBP NO) (not covered): 1Q18 results | Frontera Resources Corporation (FRR LN) (not covered): Operations update in Georgia | SDX Energy (SDX LN/CN)1,6; BUY, £0.70: Drilling success in Morocco | Tethys Oil (TETY SS)6 ; BUY, SEK80.00: 1Q18 results | Kosmos Energy (KOS LN/US) (not covered): 1Q18 results
The LMS-1 well at Lalla Minouma (SDX WI: 75%) encountered 16.4 mm net gas pay in high quality sands (32% porosity) in an over-pressured section in the H-9 sequence that had not been previously tested in the area.
ENI (ENI IM) (not covered): 1Q18 results | Faroe petroleum (FPM LN)6 ; BUY, £1.60 : Tambar production above expectations | SDX Energy (SDX LN/CN)1,6: LMS-1 exploration well spud, Morocco
The Rabul 4 Well in the West Gharib Concession in Egypt (SDX 50%, joint op) encountered c. 43 ft of net heavy oil pay across the Yusr and Bakr formations, with an average porosity of 16%.
Range Resources (RRL LN/RRS AU) (not covered): Report ended 31 March 2018 (FY 3Q18) | Serica Energy (SQZ LN) (not covered): Erskine field update in the UK North Sea | Exillon Energy (EXI LN) (not covered): March production in Russia | SDX Energy (SDX LN/CN): BUY, £0.70; Oil discovery at Rabul 4 well, Egypt | Oryx Petroleum (OXC CN): Under Review
Echo Energy (ECHO LN) (not covered): Oil to surface in Argentina | SDX Energy (SDX LN/CN)1,6; BUY, £0.70: Morocco gains materiality | Maurel & Prom (MAU FP) (not covered): 1Q18 results | Savannah Petroleum (SAVP LN) (not covered): Bushiya Oil Discovery | Tlou Energy (TLOU LN) (not covered): 1Q18 operations
The LNB-1 exploration well at Lalla Mimouna in Morocco (SDX 75 %) has discovered gas which the company gives an estimated un-risked mid-case volume of 10.2 bcf and 0.055 mmbbl of condensate. This would exceed the size required to justify development and connection to the existing infrastructure in the Sebou area. The gas shows in this section contained heavier hydrocarbon components throughout, which is indicative of a thermogenic hydrocarbon source rock. These types of shows have not been seen in other parts of the basin and indicate that a new petroleum system has been encountered in this area.
SDX Energy has discovered gas at the LNB-1, Morocco with 300m of gas-bearing horizons discovered in an over-pressured section in the Lafkarena sequence. Heavy hydrocarbons contained in gas indicate a thermogenic hydrocarbon source rock, indicative of a new petroleum system that has previously not been encountered at Sebou. Preliminary estimates of recoverable gas at LNB-1 are un-risked mid-case volume of 10.2bcf with 55kbbls of condensate. This is significantly larger than the traps encountered at Sebou and exceeds the threshold for commerciality for a processing facility and pipeline to Sebou area. LNB-1 awaits logging and testing which will be carried out in due course once suitable equipment can be mobilised. We see this a material discovery for SDX, should flow tests confirm productivity, for two reasons: 1) well costs are marginally higher than at Sebou at c $2.7m but with un-risked recoverable volumes five times greater, per-well returns are likely to be significantly superior. In addition, once de-risked, the new play at Lalla Mimouna has the potential to rapidly de-risk SDX’s ability to meet projected gas demand in Kenitra. 2) liquids discovered at LNB-1 open up a new play fairway with potential to provide SDX with an additional revenue stream in Morocco that is not constrained by demand.
The LNB-1 exploration well at Lalla Mimouna in Morocco (SDX 75 %) has discovered gas which the company gives an estimated un-risked mid-case volume of 10.2 bcf and 0.055 mmbbl of condensate. This would exceed the size required to justify development and connection to the existing infrastructure in the Sebou area. The well could indicate that a new petroleum system has been encountered in this area. Given we carried this well at 1 bcf, this adds £0.09/sh onto our ReNAV, increasing our Target Price from £0.60/sh to £0.70/sh. We maintain our BUY recommendation even after the share price’s 20%+ increase in little over a week.
Amerisur Resources (AMER LN)6; HOLD, £0.20: Year-end 2017 results and reduced outlook | Sino Gas & Energy (SHE AU) (not covered): 1Q18 update in China | Valeura Energy (VLE CN)1,6; BUY, C$11.50: Realized natural gas prices increase 10%, pushing cash flow and NAV estimates higher | SDX Energy (SDX LN/CN)1,6; BUY, £0.60: LNB-1 gas discovery in Morocco | Tethys Oil (TETY SS)6; BUY, SEK80: March production in Oman
KRM22, a closed-ended investment company with a particular focus on risk management in capital markets, is looking to join AIM. Offer tbc, expected 30 April 2018 Serinus Energy -international upstream oil and gas exploration and production company. Its principal assets are located in Romania (development phase) and Tunisia (production phase). Raising c.£10m. Offer TBA. Due mid May.
The Ibn Yunus-1X exploration well at South Disouq, Egypt (SDX 55%, op), encountered 100.8 ft of net gas pay in the Abu Madi horizon, with an average porosity of 28.5%. The well was drilled to a total depth of 9068 ft and encountered a reservoir section of better quality and thicker than pre-drill expectations.
SDX Energy has announced results from the Ibn Yunus-1 well at South Disouq, Egypt (SDX 55%). Ibn Yunus-1 is the second consecutive gas discovery at South Disouq (after SD-1X) and encountered 100.8 net meters of conventional pay in the Abu Madi horizon, with average porosity of 28.5%. The well came in on prognosis but with a reservoir thickness and quality above pre-drill expectations. We expect to de-risk Ibn Yunus on flow testing; however, indicatively moving to an 80% chance of success (equivalent to our risking for SD-1X) from 32% would add 4.4p/share to our RENAV in our 90bcf recoverable case. We recently published a detailed update on our view of the group valuation, which stands at a core NAV of 58.3p/share and RENAV of 65.6p/share.
Faroe Petroleum (FPM LN)6; BUY, £1.60: Execution and value | OMV (OMV G) (not covered): 1Q18 trading update | SDX Energy (SDX CN/LN)1,6; BUY, £0.60: Gas discovery at Ibn Yunus-1X well, Egypt
SDX has spud its Ibn Yunus-1X exploration well at South Disouq, Egypt. It is anticipated to take c. 30 days to drill and is targeting around 100 bcf of gas, gross. The company believes a success case at this well could de-risk up to 2 tcf gross on the block.
Apache (APA US) (not covered): Discovery in the UK North Sea | Condor Petroleum (CPI CN)8 ; Discontinuing coverage | Royal Dutch Shell (RDSA/B LN) (not covered): Selling stake in West Qurna 1 in Iraq | SDX Energy (SDX LN/CN); £0.60, BUY: Spud of Ibn Yunus-1X well, Egypt
SDX Energy has reported FY17 results, which reflect the positive impact of the late January 2017 acquisition of Circle Oil’s Egyptian and Moroccan business, strong netbacks and Egyptian receivable recovery. Netback, defined as sales net of operating expense and government royalties, stood at $28.9m and compares with our estimated $26.4m. Cash at year-end 2017 stood at $25.8m and has since grown to $30.6m as at 28 February 2018 after a further $6m in backdated receivables was recovered. We recently published a detailed update on our view of Moroccan gas sales and group valuation, which stands at a core NAV 58.3p/share and RENAV of 65.6p/share.
YE17 WI 2P reserves were 13.5 mmboe (post Circle acquisition +45%). The increase is a result of the conversion of c. 3.8 mmboe of net 2C Resources at South Disouq into 2P reserves (out of a possible c. 5.7 mmboe net 2C). Overall 2017 production was c. 3.2 mboe/d (GMP FEe: 3.3 mboe/d), consisting of 2.0 mboe/d from NW Gemsa in Egypt (GMP FEe: 2.1 mboe/d), 595 bbl/d from Meseda in Egypt (GMP FEe: 626 bbl/d) and 596 boe/d from Morocco (GMP FEe: 587 boe/d). 2018 gross production guidance at NW Gemsa is 4.4 mboe/d (GMP FEe: 4.4 mboe/d), at Meseda is 3.8 mbbl/d (GMP FEe: 3.8 mbbl/d), 50 mmcf/d plateau at South Disouq as previously guided and 8-10 mmcf/d in Morocco as previously guided.
Valeura Energy (VLE CN)1,6; BUY, C$10.00: Year-end 2017 results and continued focus on the deep basin centered gas accumulation | Greenfields Petroleum (GNF CN)8 ; Discontinuing research coverage | SDX Energy (SDX LN/CN)1,6: 4Q17 results | Savannah Petroleum (SAVP LN) (not covered): FY17 results
The SAH-2 well on the Sebou permit (WI 75%) tested at an average restricted rate of 12.9 mmcf/d on a 40/64" choke, with a maximum flow rate of 13.5 mmcf/d. The well will now be shut in for several days for a pressure build-up then be connected to local infrastructure and placed on test production. The LNB-1 exploration well on the Lalla Mimouna permit (WI 75%) in Morocco has been spud and is anticipated to take 15-20 days to drill. LNB-1 is the eighth well in the company's nine well campaign in Morocco, and the first of two remaining exploration commitment wells to be drilled on the permit in 2018. If successful it will be completed, flow tested and connected to existing infrastructure.
IGas Energy (IGAS LN) (not covered): FY17 results in the UK | Serinus Energy (SEN CN): Speculative Buy, C$0.55: YE17 reserves update | Genel Energy (GENL LN); HOLD, £1.60: Receipt of payment for KRI oil exports | Gulfsands Petroleum (GPX LN) (not covered); Financing & delisting | SDX Energy (SDX CN/LN)1,6: BUY, £0.60; SAH-2 test results in Morocco | Eland Oil & Gas (ELA LN) (not covered): Opuama operations update in Nigeria
Kore Potash— advanced stage mineral exploration and development company whose primary asset is its interest in the Sintoukola Project, a potash project located in the Republic of Congo. ) Measured, Indicated and Inferred Mineral Resource of 5,953Mt at an average grade of 22.0% KCl. Offer TBA. Due end March. Perfomatrix PLC, a global end to end Performance Marketing technology and services company headquartered in the UK, is looking to join AIM in early April 2018, offer TBC Crusader Resources, an ASX-listed public company incorporated in Australia, which is primarily focused on the exploration and development of gold assets in Brazil. Offer TBC, expected late March. SimplyBiz, a Financial Services Firm, looking to join AIM raising £30m via placing and £34.6m via a sale of existing ordinary shares at 170p giving a market cap of £130m. Expected 4 April Bacanora Lithium—Readmission. No new money. Mkt cap £140m. Due 21 March. the new holding company for Bacanora Minerals Ltd Core Industrial REIT—established to invest in Irish-based industrial properties, predominantly located in the Greater Dublin Area. Vendor placing and new funds to a total of €225m, Target gross proceeds €207m. Expected Mid March Polarean - Medical drug-device combination company operating in the high resolution medical imaging market. Offer TBC. Due 26 March
The Rabul 5 well in the West Gharib Concession in Egypt encountered c. 151 ft of net heavy oil pay across the Yusr and Bakr formations, with an average porosity of 18%. Further evaluation is ongoing, after which the company expects the well to be completed as a producer and connected to the central processing facilities at Meseda.
Cairn Energy (CNE LN); BUY, £1.50: The bull case relies on India again | SDX Energy (SDX CN/LN)1,6: BUY, £0.60; High net pay at Rabul 5 well, Egypt
Crusader Resources, an ASX-listed public company incorporated in Australia, which is primarily focused on the exploration and development of gold assets in Brazil. Offer TBC, expected late March. SimplyBiz, a Financial Services Firm, reported to be considering an IPO targeting a market capitalisation of between £140m and £155m in a listing that would raise £30m of new money. Bacanora Lithium—Readmission. No new money. Mkt cap £140m. Due 21 March. the new holding company for Bacanora Minerals Ltd Core Industrial REIT—established to invest in Irish-based industrial properties, predominantly located in the Greater Dublin Area. Vendor placing and new funds to a total of €225m, Target gross proceeds €207m. Expected Mid March Polarean - Medical drug-device combination company operating in the high resolution medical imaging market. Offer TBC. Due 26 March Block Energy—a NEX Listed UK based oil exploration and production company whose main country of operation is the Republic of Georgia, looks to join AIM end of February 2018. Offer TBC
The SAH-2 well on the Sebou permit in Morocco encountered 5.2 m of net gas pay across two zones in the Guebbas and Hoot formations with an average porosity of 33%. The reservoir thickness came in above pre-drill expectations. The well will now be completed, tested and connected to existing infrastructure. SDX expects testing results in early April.
SDX Energy has announced results from the SAH-2 well on the Sebou permit in Morocco (SDX 75%). SAH-2 is the seventh well in the company’s nine-well programme, and the fifth gas discovery. SAH-2 encountered 5.2 net meters across two pay zones, with average porosity of 33%. The well came in on prognosis but with a reservoir thickness above pre-drill expectations. This result will support the company’s previously announced planned production increase in Morocco to 8-10mmscfd by the end of 2018. We recently published a detailed update on our view of Moroccan gas sales and group valuation, which stands at a core NAV 58.3p/share and RENAV of 65.6p/share.
City law firm Rosenblatt reported in the press to be considering a London listing. The commercial firm had a reported revenue of £16m in 2017 VR Education Holdings—a virtual reality software and technology company. Raising £6m at 10p, mkt cap £19.3. Due 12 March SimplyBiz, a Financial Services Firm, reported to be considering an IPO targeting a market capitalisation of between £140m and £155m in a listing that would raise £30m of new money. Bacanora Lithium—Readmission. No new money. Mkt cap £140m. Due 21 March. the new holding company for Bacanora Minerals Ltd Core Industrial REIT—established to invest in Irish-based industrial properties, predominantly located in the Greater Dublin Area. Vendor placing and new funds to a total of €225m, Target gross proceeds €207m. Expected Mid March Polarean - Medical drug-device combination company operating in the high resolution medical imaging market. Offer TBC. Due 26 March Block Energy—a NEX Listed UK based oil exploration and production company whose main country of operation is the Republic of Georgia, looks to join AIM end of February 2018. Offer TBC
SDX Energy has announced results from the KSS-2 well on the Sebou permit in Morocco (SDX 75%). KSS-2 is the sixth well in the company’s nine-well programme, with four discoveries to date. KSS-2 encountered eight net meters of high-quality reservoir, but had low gas saturation and was deemed to be non-commercial. This result is not expected to affect the company’s previously announced planned production increase in Morocco to 8-10mmscfd by the end of 2018. We recently published a detailed update on our view of Moroccan gas sales and group valuation, which stands at core NAV 58.3p/share and RENAV 65.6p/share.
The KSS-2 well on the Sebou permit encountered 8 net metres of high quality reservoir but only low gas saturation and is not deemed to be commercial.
Ecopetrol (EC US) (not covered): YE17 reserves in Colombia | Range Resources (RRL LN/RRS AU) (not covered): Operating update | OMV (OMV AG) (not covered): 4Q17 results | SDX Energy (SDX LN)1,6; BUY, £0.60: Drilling results in Morocco | San Leon Energy (SLE LN) (not covered): Low production in Nigeria | Tlou Energy (TLOU LN) (not covered): Reserves increase in Botswana
In Egypt, at South Disouq, the Ibn Yunus exploration well is anticipated to be spud in mid-March 2018 and take 30 - 40 days. It will target the same Abu Madi gas bearing intervals that were discovered in the SD-1X well. The rig will then move to the SD-1X discovery, where it will drill two appraisal wells, before moving on to the Kelvin-1X exploration prospect. On the West Gharib Concession the Rabul 5 development well has spud and is anticipated to take c. 30 days. It is the first of two development wells planned for the field this year. The well is targeting the Bakr and Yusr oil bearing intervals found in the Rabul 1 and 2 wells. In Morocco, drilling has been delayed at the KSS-2 development well due a failure of the top drive unit on the rig however it is currently being repaired and the company expects the well to reach its target depth within the next 7 to 10 days. The company doesn’t anticipate well costs to materially change, as the rig has been on zero rate while repairs on the top drive unit are being carried out.
Faroe Petroleum (FPM LN)6; BUY, £1.30: Trading update and FY18 outlook | SDX Energy (SDX LN/CN)1,6: BUY, £0.60; South Disouq, West Gharib & KSS-2 well update | Tethys Oil (TETY SS)6 ; REDUCE, SEK60: 4Q17 Results | Eland Oil & Gas (ELA LN) (not covered): Opuama update in Nigeria
SDX Energy has announced the completion of the ONZ-7 well on the Sebou permit in Morocco (SDX 75%) with the well delivering an average flow rate of 10mmscfd and maximum flow of 15.3mmscfd, the highest flow rate to date from the four successful wells drilled and in the basin historically. ONZ-7 provides confidence in gas deliverability and the resource base as SDX expands its customer base in Kenitra. Edison recently published a detailed update on our view of Moroccan gas sales and group valuation, which stands at core NAV of 58.3p/share and RENAV of 65.6p/share.
Using a 48/64" choke, the ONZ-7 well achieved an average flow rate of 10 mmcf/d. The well will now be shut in for several days for a pressure build-up after which it will be connected to local infrastructure. The maximum flow rate during this test was 15.34 mmcf/d.
BP (BP LN) (not covered): 4Q17 results | Aminex (AEX LN) (not covered): Third party resource upgrade in Tanzania | SDX Energy (SDX LN/CN)6 : BUY, £0.60; ONZ-7 well, Morocco | Total (FP FP) (not covered): Farm-out deal in South Africa
Block Energy—a NEX Listed UK based oil exploration and production company whose main country of operation is the Republic of Georgia, looks to join AIM end of February 2018. Offer TBC | OnTheMarket—Intention to float on AIM to raise c.£50m which will be used to fund the growth of the OnTheMarket.com portal, already the third biggest UK residential property portal provider. Offer raising £30m at 165p with mkt cap of £100m . Due 9 Feb.
Key takeaways from SDX’s analysts’ site visit to Morocco include the asset’s operational simplicity and low operating costs. Realised gas prices averaging $10/mcf combined with a 10-year tax holiday drive unit netbacks in the $8.5-9.0/mcf range. Demand growth potential in Kenitra, the fourth largest industrial town in Morocco, was very visible with the emphasis on SDX to grow the company’s gas resource base in order to underpin contract base expansion. SDX’s 2017/18 well programme should go some way to deliver on a 2018 production target of an 8-10mmscfd exit rate, and we estimate the market could support an incremental 10-11 wells of gas resource in 2019/2020. We have increased our core NAV from 52.5p/share to 58.3p/share (+11%) and RENAV from 64.0p/share to 65.6p/share (+3%).
SDX recently organised a field trip to Morocco. Seeing the SDX’s operations has given us increased confidence in the growth outlook for the company’s gas demand in Morocco. The nine well drilling campaign goes from strength to strength with a good chance that the four remaining wells could add to the four out of five successes so far. This could add to production capacity. Gross 2018 production guidance in Morocco of 8-10 mmcf/d seems well within reach given the contracts being negotiated and the expanding industrial activity around the city of Kenitra. The company also released an operational update and 2018 outlook which is broadly in line with our expectations. FY18 net production guidance at Gemsa is c. 2.2 mboe/d, Meseda c. 730 bbl/d and 50 mmcf/d in South Disouq is expected in mid-2018. Our increased 2018 production assumption in Morocco of 8 mmcf/d gross by YE18 is offset by a more conservative pricing assumption in South Disouq of US$2.65/mcf, resulting in no change to our 60p/sh Target Price and BUY recommendation. Reserves upside and catalysts. A reserves update
Diversified Gas & Oil (DGOC LN) (not covered): Pre-close trading update | Jersey Oil and Gas (JOG LN) (not covered): Operational update in the UK | Serica Energy (SQZ LN) (not covered): Operations update | SDX Energy (SDX CN/LN)1,6: BUY, £0.60: Fueling industrial growth in Morocco | Sterling Energy (SEY LN) (not covered): Termination of funding agreement offshore Mauritania |
In 4Q17, SDX received about US$6 mm of backdated Egyptian and Moroccan receivables. In Morocco, SDX is targeting 8-10 mmcf/d production by YE18. At Meseda in Egypt, SDX plans to produce 3.8 mbbl/d with four new wells and up to five ESP replacements, for an overall gross capex of US$6.0 mm. At Gemsa, FY18 gross production is expected to be in line with 2017 (4,422 boe/d) with two new wells and seven workovers for an overall gross cost of US$8.3 mm. At South Disouq, two development plans will be drilled in 1H18 with an overall gross development capex to first gas during the period of US$15 mm. Assuming all necessary approvals are obtained, the field is expected to start production in mid-2018 at 50 mmcf/d. The gas price is still under negotiation. In addition, SDX is also drilling two exploration wells at South Disouq in 1H18 targeting 150 bcf gross prospective resources.
Premier Oil (PMO LN); Speculative Buy, £1.20: High realizations at Catcher | SDX Energy (SDX LN)1 ; BUY, £0.60: Operational update
SDX Energy has announced the discovery of gas at the ONZ-7 development well on the Sebou permit in Morocco. The ONZ-7 well was drilled to a total depth of 1,167m, with 5m of net conventional gas pay in the Hoot formation. Reservoir quality exceeded initial expectations with porosity in the pay section at 35.3% – a further update on well flow rates is expected in early February. SDX has made four discoveries from five wells drilled in the current nine well campaign – an 80% E&A success rate with all prospects drilled on high resolution 3D seismic discovering gas. Our last published valuation stands at 65p/share (full NAV breakdown), with Sebou making up c 17% or 10.9p/share of our group risked valuation. We intend to revise our valuation for recent Moroccan exploration success on our return from the company’s analyst site visit to be held on 24 and 25 January 2018.
The ONZ-7 development well on the Sebou permit in Morocco encountered 5 m of net gas pay in the Hoot formation and 35.3% porosity, exceeding company expectations. The well will now be completed, tested and connected to existing infrastructure with SDX expecting testing results in early February. The KSS-2 well at Sebou is the next to be drilled.
Cairn Energy (CNE LN); HOLD, £2.20: Trading update and 2018 outlook | Lundin Petroleum (LUPE SS) (not covered): 2018 budget and production guidance | Valeura Energy (VLE CN)6 ; BUY, C$5.00: Risked NAV estimate significantly increases due to valuation of the Banarli License deep formation | Genel Energy (GENL LN); HOLD, £1.60: Extension of conditions precedent for Gas Lifting Agreement (GLA) | SDX Energy (SDX CN/LN)1 BUY, £0.60: Gas discovery at ONZ-7 well, Morocco
Hydrominer GmbH, An Austrian cryptocurrency miner, is considering an initial public offering (IPO) on the London Stock Exchange AIM during 2018 according to an article on Bloomberg | Block Energy—a NEX Listed UK based oil exploration and production company whose main country of operation is the Republic of Georgia, looks to join AIM end of February 2018. Offer TBC | Cradle Arc—holding company of a group of companies focused on the exploration and development of precious and base metals projects in Africa. Offer raising £2.4m with market cap of £20.13m. Expected 24 Jan 2018 | OnTheMarket—Intention to float on AIM to raise c.£50m which will be used to fund the growth of the OnTheMarket.com portal, already the third biggest UK residential property portal provider. Expected valuation £200m to £250m.
NuEnergy Gas (NGY AU) (not covered) – Reserves certification in Indonesia | AKER BP (AKERBP NO) (not covered): Production update in Norway | SDX Energy (SDX LN/CN)1; BUY, £0.60: Well spud in Morocco | Global Petroleum (GBP LN)1; Speculative Buy, £0.05: Resources estimate | Wentworth Resources (WRL LN/NO)1,6; BUY, £0.35: Appointment of CEO
SDX Energy has announced the completion of the KSR-16 well on the Sebou permit in Morocco (SDX 75%) with the well delivering a restricted flow rate of 8.43mmscfd, exceeding management expectations, and the highest flow rate to date from the three successful wells drilled to date. KSR-16 is now on production.
The KSR-16 well on the Sebou permit (SDX 75%) has been tested into the sales line at 8.43 mmcf/d. The well has been placed on production. The ONZ-7 well spud is anticipated prior to the week end. The company’s existing daily commitments remain at c. 6 mmcf/d and it forecasts gas sales of 10-11 mmcf/d in 2018.
Soco International (SIA LN) (not covered): Potential merger with Kuwait Energy | SDX Energy (SDX LN/CN)1 ; BUY, £0.60: Morocco Update | ShaMaran Petroleum (SNM CN) (not covered): Production update in Kurdistan | Victoria Oil & Gas (VOG LN); Speculative Buy, £0.90: Waiting for visibility | Weekly Crude cut
The ELQ-1 well in the Gharb Centre permit encountered two meters of marginal net conventional gas pay, in the Hoot formation. The company believes that the well is not commercial. This well was the only well in the current programme to be drilled using legacy low-resolution 3D data. A new high-resolution 3D seismic programme will begin in 2Q18. The drilling rig will move to the ONZ-7 development location at Sebou. SDX has been granted a four-month extension to its Lalla Mimouna permit, through to 22/07/2018. This will allow the company sufficient time to evaluate the results of its upcoming exploration drilling campaign, which is expected to take place in March 2018.
SDX Energy (SDX LN/CN)1 ; BUY, £0.60: Morocco Update
Cradle Arc—holding company of a group of companies focused on the exploration and development of precious and base metals projects in Africa. Offer raising £2.4m with market cap of £20.25m. Expected 10 Jan 2018 | Volex VLX.L—The global provider of cable assemblies is proposing to move from the main market to AIM on 19 January. £75m market cap. FYMar18E rev £241.5m and £7.19m PBT | OnTheMarket—Intention to float on AIM to raise c.£50m which will be used to fund the growth of the OnTheMarket.com portal, already the third biggest UK residential property portal provider. Expected valuation £200m to £250m.
Eqtec—Company with access to a proprietary advanced gasification technology used in industrial size power plants to convert waste into synthetic gas to generate electricity. Raising £1.6m. Mkt Cap £8.7m. Due late Dec. Volex VLX.L—The global provider of cable assemblies is proposing to move from the main market to AIM on 19 January. £75m market cap. FYMar18E rev £241.5m and £7.19m PBT. OnTheMarket—Intention to float on AIM to raise c.£50m which will be used to fund the growth of the OnTheMarket.com portal, already the third biggest UK residential property portal provider. Expected valuation £200m to £250m.
The KSR-15 development well has been tested at a restricted average flow rate of 7.52 mmcf/d. The well has also now been placed on production.
President Energy (PPC LN) (not covered): Operational update in Argentina | SDX Energy (SDX LN)1; BUY, £0.60: Strong flow rate at KSR-15 in Morocco | Cobalt International Energy (CIEI US) (not covered): Files for bankruptcy | Savannah Petroleum (SAVP LN) (not covered): Launch of placing
The KSR-16 development well on the Sebou permit encountered 14.2 m of net gas pay in the Hoot formation. The Company expects that the well will be connected to the existing infrastructure and placed on production within the next 30 days. The drilling rig will now move to the ELQ-1 prospect on the Gharb Centre permit and drill the first commitment well on this recently acquired licence. The recently completed KSR-15 well has been connected to the existing infrastructure and it is anticipated that test production will commence early next week.
Hurricane Energy (HUR LN) (not covered): CPR in the UK | Premier Oil (PMO LN); Speculative Buy, £1.00: Divestment of interest in pipeline | Genel Energy (GENL LN); HOLD, £1.90: Positive update at Peshkabir in Kurdistan | SDX Energy (SDX LN/CN)1: BUY, £0.60; Success at KSR-16 well in Morocco
SDX Energy reported its 2017 Q3 earnings on 21 November. The company has reported a comprehensive income of US$4.4 million for the quarter to give US$30.9 million for the year to date. The company had an underlying netback (revenues less operating costs) of US$7.5 million. The balance sheet has been further strengthened by the US$10 million placing in September to leave net cash at US$30.5 million up from US$27.6 million at Q2 2017. This placing was to accelerate the company’s drilling programme in Egypt and Morocco. We make no changes to estimates.
Cabot Energy (CAB LN)1: Speculative Buy, £0.08: Positive operational update | SDX Energy (SDX LN/CN)1; BUY, £0.60: Spud of KSR-16 in Morocco | Global Petroleum (GBP LN)1: Speculative Buy, £0.05 Licence extension in Namibia
Belluscura— Provider of premium medical devices at value prices to address part of the global unmet need for affordable, premium quality medical devices. Raising £7.5m to £10m. Offer TBA. Due early Dec Ten Lifestyle Hldgs - Technology-enabled lifestyle and travel platform providing trusted concierge services to the world's wealthy. Net revenue increased from £20m in the year ended 31 August 2015 to £33m in the year ended 31 August 2017, a compound annual growth rate of 29%. Offer raising £32.2m at 134p with market cap of £104.8m, expected 29 Nov 2017. Miriad Advertising—Global video advertising company incorporated in 2015 and is engaged in the development of native invideo advertising . 2016 rev £0.7m and £7.3m operating loss. Offer TBA Keystone Law Group— full service law firm with over 250 self-employed lawyers . Due 27 Nov. Raising £10m at 160p. Mkt Cap £50m. Revenue of £25.6 million and EBITDA of £2.1 million. In FYJan17. Beeks Financial Cloud -niche cloud computing and connectivity provider for automated (algorithmic) trading in Forex and Futures financial products . Raising £7m. Mkt Cap c.£24.5m. Due 27 Nov. FYJun17 rev £4m. Profitable at operating level. OnTheMarket—Intention to float on AIM to raise c.£50m which will be used to fund the growth of the OnTheMarket.com portal, already the third biggest UK residential property portal provider. Expected valuation £200m to £250m. OG Graphite, brownfield development-stage graphite company focused on the reactivation of its wholly-owned Kearney natural flake graphite mine and mill located 280 km north of Toronto, Canada. Offer TBA, expected mid November.
Overall production for the first 9 months of 2017 was 3.3 mboe/d (GMP FEe: c. 3.5 mboe/d). Production from Gemsa in Egypt was 2.1 mboe/d (GMP FEe: 2.2 mboe/d). Production from Meseda in Egypt was 606 bbl/d (GMP FEe: 631 bbl/d). Production in Morocco was 568 boe/d (GMP FEe: 577 boe/d). Net cash at 30th September 2017 was c. US$30.5 mm (GMP FEe: c. US$38.0 mm) given growing receivables (we had expected a reduction). Subsequent to September 30, 2017, the company collected US$5.8 mm of trade receivables.
Serica Energy (SQZ LN) (not covered): Acquisition of BP interests in the Bruce, Keith and Rhum fields in the North Sea | Nostrum Oil & Gas (NOG LN)6 ; BUY, £5.15:3Q17 results | SDX Energy (SDX LN/CN)1 : BUY, £0.60; 3Q17 Results | Cairn Energy (CNE LN); HOLD, £2.20: BP in discussion with Cairn on Senegal? | Far (FAR AU) (not covered): Resources estimates in The Gambia
The KSR-14 well has been flow tested into the sales line at of 6.4 mmcf/d. It will remain on production for an extended period prior to being shut in for a pressure build-up as part of the year end reserve estimate process. At the KSR-15 development well the completion equipment has been run and connection to the nearby infrastructure is now underway. Flow testing is targeted for early December 2017. The rig move to the next location, KSR-16, has now commenced. On the Gharb Centre exploration permit, the seismic tender for 240km2 of new 3D seismic has been completed. The company expects seismic acquisition to commence at the end of 2Q18.
Tap Oil (TAP AU) (not covered): Uncommercial well in Thailand | Faroe Petroleum (FPM LN)6 ; BUY, £1.30: VNG selling Norway? | SDX Energy (SDX LN/CN)1 : BUY, £0.60; Operational update in Morocco
The KSR-15 development well on the Sebou permit (75% WI) encountered 17.2 m of net gas across 4 intervals. The primary target, the Hoot sand, had an average porosity of 29%, which is the highest average porosity recorded for the Hoot sand in the basin. The company expects the well to be on production in early December. The company also expects testing of the previously drilled KSR-14 well to commence this week.
Trinity Exploration & Production (TRIN LN) (not covered): Operational update in Trinidad | Royal Dutch Shell (RDSA/B LN) (not covered): Selling some interests in Woodside Petroleum (WPL AU) | Tullow Oil (TLW LN); REDUCE, £1.85: Completion of divestment of Dutch assets | San Leon Energy (SLE LN) (not covered): Petition by a High Court to wind up the company | KMG EP (KMG LI) (not covered): Financial results for the first nine months of 2017 | Rosneft (ROSN LI) (not covered): 3Q17 results in Russia | SDX Energy (SDX LN/CN): Success at KSR-15 well in Morocco | TransGlobe Energy (TGL CN); BUY, CN$3.50: TransGlobe reports strong cash flow in 3Q17 | Africa Oil (AOI CN/SS); BUY, C$3.00 & Eco (Atlantic) Oil and Gas (EOG CN/ECO LN) (not covered): Strategic partnership
ENI (ENI IM) (not covered):3Q17 results | Total (FP FP) (not covered): 3Q17 results | Caspian Sunrise (CASP LN) (not covered): BNG contract renewal in Kazakhstan | SDX Energy (SDX LN/CN)1 ; BUY, £0.60: Well spud in Morocco | Getech (GTC LN) (not covered): Handling Sierra Leon licensing round | Tullow Oil (TLW LN); REDUCE, £1.85: Dry hole in Suriname | Victoria Oil & Gas (VOG LN)1,6; BUY, £1.80: Cashed-up to grow exponentially
SDX Energy has announced two successful well results in recent weeks, with additional oil discovered in Egypt and more net pay found in its first Moroccan gas well than expected. The next six months are busy ones for SDX, with eight more wells to be drilled in Morocco to supply a high value gas market. Two wells will be drilled in Egypt to delineate its existing South Disouq discovery and two exploration wells will target prospects that could materially increase the gas resources. In addition, programmes at NW Gemsa and Meseda should materially increase production. Our NAV increases from 64p to 65p/share (increases in absolute terms are partially offset by foreign exchange movements).
SDX Energy has recently announced that it has raised US$10 million through an oversubscribed share placing. Placing funds will be used to accelerate activity with the money earmarked for two exploration wells in Egypt and two further development wells in Morocco. The two exploration wells in Egypt will be targeting an additional 150 BCF in the South Disouq licence following the company’s success at its SD-1X exploration well. The company has also decided to add a further two development wells to its seven well programme in Morocco which should help prove up additional reserves and allow it to boost production.
The KSR-14 well encountered 20 m of net pay in the Guebbas and Hoot formations over 4 intervals. The net pay encountered in the deeper horizon is larger than anticipated. In addition the well encountered c.10 meters net pay in a shallower horizon that was not accounted for prior to drilling
Aker BP (AKERBP NO) (not covered): 3Q17 production | Zoltav Resources (ZOL LN) (not covered): Operational update in Russia | Genel Energy (GNL LN); HOLD, £1.90: Payment for Kurdistan export in July | SDX Energy (SDX LN)1; BUY, £0.60: Successful well in Morocco
Totally (TLY) - Sch 1 for £11m RTO of Vocare, a provider of integrated urgent care services to the NHS throughout the UK. £76.8 million rev in the year ended 31 March 2017. Totally to address Care Quality Commission concerns. Due 24 Oct. Central Asia Metals (CAML) -RTO of Lynx Resources. Anticipated market capitalisation at Admission: £404.8m. Raising £113m at 230p. Acquiring the SASA zinc-lead mine in Macedonia from Solway Industries. Due 15 Dec. Springfield Properties—Scottish housebuilder. “Our turnover exceeded £100 million for the first time this year and now we employ around 500 people. This IPO is the next step in our growth.” Expected Mid October. Offer TBA. OnTheMarket—Intention to float on AIM to raise c.£50m which will be used to fund the growth of the OnTheMarket.com portal, already the third biggest UK residential property portal provider. Expected valuation £200m to £250m. Orogen plc, to be renamed Sosandar plc on Admission. Sosander is an online womenswear brand specifically targeted at a generation of women who have graduated from younger online and high street brands, and are looking for affordable clothing with a premium, trend-led aesthetic. Offer to raise £5.3m with market cap of £16.1m, expected 2 November 2017 OG Graphite, brownfield development-stage graphite company focused on the reactivation of its wholly-owned Kearney natural flake graphite mine and mill located 280 km north of Toronto, Canada. Offer TBA, expected late october .
The Rabul 2 Well in the West Gharib Concession has discovered c. 101.5 ft of net heavy oil pay across the Yusr and Bakr sand formations, with an average porosity of 20%. The company expects the well will be completed as a producer in the Bakr and connected to the central processing facilities at Meseda. The ultimate potential in this new Bakr structure will be better understood once the well is tested. The Rabul 2 well is the last of the commitment wells in the West Gharib concession.
Sound Energy (SOU LN) (not covered): Divestment of Italy | Frontera Resources (FRR LN) (not covered): £3.5 mm equity placing | SDX Energy (SDX LN/CN): BUY, £0.60: Oil discovery in Egypt
SDX Energy has completed the $10m equity raising to fund an accelerated drilling programme in Egypt and Morocco. This means it will be drilling wells with unrisked returns generating IRRs of more than 100%, according to the company, underlining the value of the H217 drilling programme. After the fund-raise, SDX will be fully funded to take the South Disouq discovery to first gas in early 2018, and to drill two exploration wells to explore for a further 150bcf in Egypt while increasing its Moroccan drilling programme to nine wells to boost resources and increase production. These will have the effect of increasing certainty on future developments and bringing forward valuable cash flows. These positive effects have been offset by a reduction in our long-term oil price assumption and some modelling adjustments. Our full NAV is now 64p/share.
Regal Petroleum (RPT LN) (not covered): 1H17 results | SDX Energy (SDX LN/CN)1 : BUY, £0.55; KSR-14 development well spud at Sebou in Morocco | Wentworth Resources (WRL LN/NO)1,6: BUY, £0.35; Further payments in Tanzania
Rockhopper Exploration (RKH LN) (not covered): 1H17 results | EnQuest (ENQ LN); HOLD, £0.35: 1H17 results | Serinus Energy (SEN CN)1 ; Speculative Buy, C$0.55: Tunisia update on operations in Tunisia | SDX Energy (SDX LN/CN)1 : Buy, £0.55; Boosted drilling program in Morocco & Egypt | Chariot Oil & Gas (CHAR LN) (not covered): Operational Update in Morocco | San Leon Energy (SLE LN) (not covered): Final Results
SDX has announced a £10m equity raise targeting an accelerated exploration and development well programme (in addition to its existing aggressive work programme). Two wells in Egypt will target the largest prospects close to South Disouq and aim to de-risk up to 150bcf (P50) of the prospective resources, and enable SDX to right-size the production facilities for the most economic development. In Morocco, two further wells will target around 2bcf of gas that can be quickly developed and sold at high netback prices. As such, the £10m (65% underwritten by the largest shareholder) will go entirely to growth projects that have high IRRs/NPVs, and speed up the exploitation of its development resources. The company remains in strong financial health, but the additional capital will add further momentum to realising value from the portfolio. We will update our forecasts and valuation in coming days, which currently stand at 55p/share (core NAV) and 67p/share (RENAV).
Zenith Energy (ZEN LN/CN) (not covered): Azerbaijan operational update | Aminex (AEX LN) (not covered) & Solo Oil (SOLO LN) (not covered): Submission of Ntorya Development Plan in Tanzania | SDX Energy (SDX LN/CN)1 : Buy, £0.60; US$10 mm fundraising
SDX Energy reported its 2017 interim earnings on 25 August. The company has reported a comprehensive income of US$26.5 million for the half year which was predominantly due to a gain on the acquisition of the Egyptian and Moroccan operations of Circle Oil in January 2017. The company also had an underlying netback (revenues less operating costs) of US$13.0 million and a strengthened balance sheet with net cash increasing to US$27.6 million from US$21.1 million at Q1 17, demonstrating the continued benefits from the Circle Oil acquisition.
In the half year results, SDX Energy reported H117 attributable production of 3,351boe/d. This drove Q217 revenues of $9.9m (compared to $8.1m in Q117) as the Moroccan assets were fully integrated. Cash flows increased markedly to $8.1m after sizeable reduction in working capital in Q217; cash has increased by $6.6m to $27.6m. The company remains on track for significant operational improvements in H217, with 12 workovers planned at NW Gemsa, facility upgrade and workover programme at Meseda and preparations for development at South Disouq. In Morocco, five development/appraisal wells and two exploration wells are planned to enable future increases in sales to the gas-hungry market. We look forward to the plans the company has for South Disouq. Our core NAV is unchanged at 55p/share (RENAV 67p/share)
Niko Resources (NKO CN) (not covered): Court ruling in Bangladesh | Premier Oil (PMO LN): Speculative Buy, £1.00; Strong delivery, increased resources and smart deal | DNO (DNO NO) (not covered): Settlement of Kurdistan Receivables | Genel Energy (GENL LN); HOLD, £2.00: Agreement with KRG | SDX Energy (SDX LN)1 ; BUY, £0.60: 2Q17 results
appScatter Group—Sch1 from the B2BSaaS platform that allows its paying users to distribute their apps to, and manage their apps on, multiple app stores. Following admission, appScatter intends to launch the public version of the platform, at which point the platform will be available to all app developers and publishers worldwide. Offer TBC, expected early Sept 2017 | Warehouse REIT - The Company will invest in a diversified portfolio of UK warehouse assets located in urban areas. The Company is targeting a dividend yield of 5.5p equivalent to a yield of 5.5 per cent. for the year ending 31 March 2019. Issue price 100p. Raising up to £150m. | Destiny Pharma—A clinical stage biotechnology company - lead asset (XF-73) targets antibiotic-resistant bacterial infections in hospitals. Offer TBA. Due early September. | Avingtrans (AVG.L) Sch1 on its Reverse Takeover of Hayward Tyler (HAYT). Combined market cap of c.£75m. Expected 01 September 2017 | OnTheMarket—Intention to float on AIM to raise c. £50m which will be used to fund the growth of the OnTheMarket.com portal, already the third biggest UK residential property portal provider. Expected valuation £200m to £250m. | Chesterfield Resources-newly established company formed for the purpose of acquiring a company, business or asset that has operations in the mining sector that it will then look to develop and expand. Raising £1.3m at 5p. Due 29 Aug. Mkt cap £1.4m. | Hipgnosis Songs Fund investment Company offering pure-play exposure to Songs and associated musical intellectual property rights. Offer raising £200m at 100p. The Company has decided to extend the closing date for the Placing, Offer for Subscription and Intermediaries Offer to 1 August 2017. The Company may bring forward this closing date at any time. Admission 15 September 2017
SDX Energy is a North Africa-focused E&P with production in Egypt and Morocco. The company benefits from strong cash flow generation from its oil production (Egypt) and high value gas production in Morocco, which is being re-invested to increase production markedly in H217. The company added to its portfolio in early 2017 and continues to seek other opportunities. We have adjusted our valuation, which sees the core NAV increase to 55p/share (from 40p/share) but RENAV fall to 67p/share. With further success in exploration at South Disouq this could grow further.
SDX Energy released an operations update yesterday morning, containing two important elements. Following the discovery at SD- 1X, the company has provided a resources update on its South Disouq licence in Egypt, where it has a 55% working interest. Its reserve auditors are estimating 2C resources of 47 BCF of gas and 2.3 mmbbl of condensate while best case additional prospective resources are now estimated at 180 BCF of gas and 8.7 mmbbl. Secondly, the company is also cranking up activity in Morocco where it has now contracted a rig which will drill seven wells to commercialise more gas.
La Francaise de l’Energie (LFDE FP)1,7; Speculative Buy, EUR40.00: FY16/17 annual revenue | Regal Petroleum (RPT LN) (not covered): Ukraine update | Genel Energy (GENL LN); HOLD, £0.90: Payment for export in the KRG | African Petroleum (APCL NO) (not covered): No extensions on Gambian licences?
Great Eastern Energy (GEEC LN) (not covered): FY results for year ended 31/03/2017 | Ophir Energy (OPHR LN); REDUCE, £0.70: Bualuang production in May | Gulf Keystone Petroleum (GKP LN) (not covered): Payment for March export in Kurdistan | SDX Energy (SDX LN/CN)1 ; BUY, £0.65: Operating update in Egypt & Morocco | Sound Energy (SOU LN) (not covered): Koba-1 well drilling update in Morocco
SDX Energy (SDX LN/CN)1 ; Buy, £0.75: Exploration permit award in Morocco | Eland Oil & Gas (ELA LN) (not covered): Operations and resources update in Nigeria | Lekoil (LEK LN) (not covered): Production update in Nigeria
SDX Energy has announced the initial results of the testing at the SD-1X gas discovery in the South Disouq licence where it has a 55% operated working interest. The initial test produced a flow rate of dry gas of 25.8 mmcf/day which was ahead of management expectations of approximately 15 mmcf/day. This flow rate was limited by the surface equipment. The well has now been shut in for initial build up and then will be flow tested at several additional flow rates and fluid samples taken in order to gather data to allow the management to proceed with a development plan.
Diversified Gas & Oil (DGO LN) (not covered): Resumption of trading date | SDX Energy (SDX LN/CN)1; Buy, £0.75: Strong flow test at South Disouq in Egypt
SDX Energy (SDX LN/CN)1 ; Buy, £0.75: Flow rates at South Disouq in Egypt | Wentworth Resources (WRL LN/NO)1,6; Buy, £0.40: 1Q17 Results |
SDX Energy has released its first quarter 2017 results, the first period incorporating its recent acquisition of Egyptian and Moroccan assets. As expected, hydrocarbon sales rose significantly, totalling 2.991mboe/d and more than doubling year-on-year, while oil netbacks also increased markedly to $44.4/boe. During the period, the company successfully drilled the South Disouq well, proving a gas resource that could start production within 12 months. We leave our NAV unchanged at 76p/share, and await the results of testing the well in the coming weeks.
SDX Energy has reported its Q1 2017 earnings. The company has reported a comprehensive profit of US$26.9 million which was predominantly due to a gain on the acquisition of the Egyptian and Moroccan operations of Circle Oil in January 2017. The company had an underlying netback of US$6.1 million over the period. The company also noted a strengthening of its balance sheet with net cash increasing to US$21.1 million up from US$18.3 million at the end of February (after its placing). These results are encouraging but we expect the market to be focused on the testing of the SD-1X gas discovery which is expected to start soon. We make no changes to estimates.
Pan Orient Energy (POE CN) (not covered): 1Q17 results | Condor Petroleum (CPI CN)8; BUY, C$3.00: 1Q17 results, on track for first natural gas production in Turkey | Volga Gas (VGAS LN) (not covered): Operating update in Russia | Tethys Oil (TETY SS)6; HOLD, SEK70: Share price appreciation | SDX Energy (SDX LN/CN)1; BUY, £0.75: 1Q17 Results | Cairn Energy (CNE LN); BUY, £2.90: No surprises in AGM statement
SDX Energy has announced that it has now completed the drilling of the SD-1X exploration well in the South Disouq licence where it has a 55% operated working interest. The company previously announced that it had discovered gas and condensate in the main target and the well was deepened to test a deeper target which had oil potential. Although this found hydrocarbons, it was not sufficient to justify completing the interval. Management has released the rig and will conduct a test of the main gas target to get a better idea of the recoverable volumes of gas and condensate.
Northern Petroleum (NOP LN)1; Speculative Buy, £0.10: Stable balance sheet and growth | Petro Matad (MATD LN) (not covered): Secures up to US$45.2 mm investment | Hurricane Energy (HUR LN) (not covered): Resources and first reserves upgrad | Po Valley Energy (PVE AU) (not covered): Farm out deal in Italy | Caspian Sunrise (CASP LN): Operational update in Kazakhstan | SDX Energy (SDX LN/CN)1; BUY, £0.75: Development imminent at South Disouq
Gran Tierra Energy (GTE CN)1,6; BUY, C$5.00: 1Q17 results | Falcon Oil & Gas (FOG LN/FO CN) (not covered): Origin Energy acquires Sasol’s interests in Beetaloo in Australia | SDX Energy (SDX LN/CN)1; BUY, £0.75/C$1.25: Results of SD-1X well in Egypt
Eve Sleep— Schedule 1 from the e-commerce focused, direct to consumer European sleep brand. Offer details TBC. Expected Mid May Velocity Composites—Schedule 1. Manufactures advanced carbon fibre and ancillary material kits (predominantly carbon fibre) for use in the production of aircraft. Mid May admission expected. Offer details TBC. Shearwater Group—Schedule 1. Acquiring SecureEnvoy for £20m in cash and shares—a provider of multifactor authentication enterprise software solutions. RTO under the AIM rules. Verditek— Schedule 1 update. On Admission, the Company's subsidiaries will be involved in advanced solar photovoltaic, filtration and absorption technologies specialising in providing environmental services. Issue price 10p. Admission in May. Kuwait Energy— $150m raise plus vendor offer. Admission due June. 2p reserves 810.0 mmboe ADES International— Provider of offshore and onshore oil and gas drilling and production services in the Middle East and Africa, seeking raise up to $170m plus vendor sale under a Standard Listing of the Main Market. Admission due May 2017. Global Ports Holding—Intention to float on Standard List of the Main Market. International cruise ports operator. Seeking $200m+ raise including $75m primary offer. Expected price range 735p to 875p. Mkt cap up to £539m. Tufton Oceanic Assets– Offer extended to 9 May on specialist funds segment of Main Market to enable investors to complete further due diligence. PRS REIT—Private rental sector REIT raising up to £250m. Admission due 31 May
SDX Energy is an oil and gas exploration and production company with assets in Morocco and Egypt. Born out of the merger between Canadian companies Sea Dragon Energy and Madison PetroGas in late 2015, SDX Energy was listed on the AIM market in London in May 2016. A solid production base, positive free-cash flow generation and debt-free balance sheet, provide a strong valuation support and put the company in a privileged position to carry out accretive acquisitions of distressed Egyptian assets, such as that of Circle Oil in early 2017. An attractive exploration portfolio provides additional high impact value optionality. The SD-1X exploration well in South Disouq already discovered gas in the shallower Abu Madi objective and is expected to reach a potentially oil-bearing deeper objective imminently. We reckon that only part of our estimated current value of South Disouq is priced in the current share price, leaving at least 35p (+57%) of potential risked upside.
Trinity E&P (TRIN LN) (not covered): Operational & Financial Update | Northern Petroleum (NOP LN)1; Speculative Buy, £0.10: FY16 results | Premier Oil (PMO LN); Speculative Buy, £1.30: Refinancing update | Nostrum Oil & Gas (NOG LN); BUY, £6.40: 1Q17 operational update | SDX Energy (SDX LN/CN)1 : BUY, £0.75/C$1.10; Concession extensions in Morocco | Sound Energy (SOU LN) (not covered): Schlumberger Investment in Morocco
SDX Energy has provided an update on its SD-1X exploration well in the South Disouq licence where it has a 55% operated working interest. The initial indications are encouraging with the well reaching its first target in the Abu Madi interval. The well has encountered 65 foot of net pay containing natural gas which is in line with predrill expectations where pre-drill estimates of gross mean prospective resources were 490 BCF of gas and 16.3 mmbbl of condensate. Although more needs to be done to determine the actual volume discovered, this discovery should provide a material boost to the group’s reserve base and be significant for shareholders.
SDX has announced it has discovered gas in the Abu Madi structure of the South Disouq SD-1X well. The well came in on prognosis, validating the company’s 3D seismic interpretation, and encountering 65ft of excellent quality net pay with average porosity of 25%. This unlocks 150–300bcf of the estimated 585bcf in the Abu Madi, with the remainder now de-risked in four other structures in the area. We expect this to be a material discovery that will contribute to a significant addition to the company reserves and resources (currently estimated to be 12.03mmboe on a 2P basis), increasing our RENAV from 57p to 76p/share.
Independent Resources (IRG LN) (not covered): Change of strategy and funding | Repsol (REP SM): (not covered): Increases interest in Vietnam | SDX Energy (SDX LN/CN)1; BUY, £0.75: Important discovery at South Disouq | Tethys Oil (TETY SS)6; BUY, SEK70: Production Update in Oman | African Petroleum (APCL NO) (not covered): Potential farm out in Senegal and Gambia
SDX Energy has grown significantly over the past 12 months. To some degree, the full year results of 24 March 2017 are less relevant as an indicator of current operations of the company. The January acquisition of Circle Oil’s Moroccan and Egyptian assets and current drilling of South Disouq stand to add to the production assets of Meseda and North West Gemsa, from which SDX produced 2.1kboe/d in 2016. SDX is in good health, holding $18m in cash as of March and has material new cash flows from the Moroccan gas production. Newsflow from South Disouq will remain the near-term catalyst and could be transformational if successful. We have adjusted our valuation, leaving an updated full NAV of 57p/share.
SDX Energy has reported its final results with the company reporting a loss after tax of US$28.00 million due to an impairment charge and the write down of its assets in Cameroon. These results are largely immaterial due to the recent acquisition of Circle Oil’s Egyptian and Moroccan assets on 27 January 2017 which will provide a material step change in production, profitability and cash flow. The company is in strong financial health with net cash balances at the end of February of US$18.3 million which will allow management to grow the business. In the short term, the market will focus on the SDX-1 exploration well, onshore Egyptian, where success would prove to be transformational in terms of reserves and significant for shareholders. The well is expected to be completed early Q2 2017.
Amerisur Resources (AMER LN)6; HOLD, £0.35: YE26 Reserves | Faroe Petroleum (FPM LN)6; Hold, £1.10 & Maersk Oil (not covered): Tyra field facilities redevelopment in the North Sea to extend Trym field production | SDX Energy (SDX LN/CN)1; BUY, £0.65: FY16 Results
SDX Energy has this morning announced that it has started drilling its first exploration well, SDX-1, on the South Disouq licence which is located onshore Egypt just to the North of Cairo. SDX has a 55% working interest in this licence. This well is probing a significant prospect with gross mean prospective resources of 490 BCF of gas and 16.3 mmbbl of condensate (100 mmboe in total). There is also the potential of deeper oil play in the licence which will also be tested with this well. Success at this well would prove to be transformational in terms of reserves and significant for shareholders. The well is expected to take approximately 30 – 45 days to drill.
SDX Energy announced this morning that it has spudded the South Disouq (SD-1X) well in Egypt, targeting gas and oil across a number of intervals. This is a high impact event for SDX Energy, as current company 2P reserves of 4.7mmboe (post acquisition) would be dwarfed by success at South Disouq (we model a 65mmboe field of which SDX holds 55% WI), which could be developed quickly due to existing pipeline infrastructure passing through the block. Our valuation for South Disouq is 6.8p/share, although on success we would expect notable de-risking. Our core NAV is 42p with a full NAV (including South Disouq) of 57p/share. The well is due to take 30-45 days, so we would expect a result in mid late April.
Valeura Energy (VLE CN)1,6: BUY, C$1.50: 4Q16 results and reduced 2017 guidance | JKX Oil & Gas (Not covered): FY16 results | SDX Energy (SDX LN/CN)1; Buy, £0.65: Commencement of drilling operations at South Disouq | WesternZagros (WZR CN)8; Speculative Buy, C$0.50: 4Q16 results and prepares to drill Sarqala-2 | Tullow Oil (TLW LN): HOLD, £2.60: Forcing investors to double down | Royal Dutch Shell (RDSA/B LN) (not covered) and ENI (ENI IM) (not covered): Recovering control of OPL245 in Nigeria
Vermilion Energy (VET CN); BUY, C$64.00 | IGAS (IGAS LN) (not covered): Potential capital restructuring | Northern Petroleum (NOP LN); SPEC BUY, £0.10: Seismic programme update in Italy | BP (BP LN) (not covered): Strategy update | ENI (ENI IM) (not covered): 4Q16 results | KMG EP (KMG LI) (not covered): KMG sold 165 mbbl/d of oil in January 2017 | JKX Oil & Gas (JKX LN) (not covered): Operating update | New pre-payments deal for Kurdistan | SDX Energy (SDX LN/SDX CN)1 : BUY, £0.65: South Disouq Drilling Update in Egypt | Tullow Oil (TLW LN): HOLD, £3.10: Division over approval of Tullow farm-out deal in Uganda?
InnovaDerma* (IDP.L) | onroy Gold & Natural Resources* (CGNR.L) | Bluerock Diamonds (BRD.L) | SDX Energy (SDX.L) | Conygar Investment Co (CIC.L) | Croma Security Solutions Group (CSSG.L) | Starvest (SVE.L) | Vertu Motors (VTU.L) | MySale Group (MYSL.L) | Creo Medical (CREO.L)
SDX Energy has acquired the Egyptian and Moroccan assets of Circle Oil, debt free, for a gross consideration of US$30 million (US$28 million net of working capital adjustments). We believe that this is an exciting purchase that provides a substantial boost to production, reserves and cash flow potentially generating incremental free cash flow of approximately US$50 million over the next two years which will allow management to build up the business both organically and through acquisition.
Green Dragon Gas (GDG LN) (not covered): Operations update in China | Private Equity commits further capital to Norway | Royal Dutch Shell (RDSA/B LN) (not covered): 4Q16 results | Tethys Petroleum (TPL LN/CN) (not covered): Court ruling in favour of Tethys | SDX Energy (SDX LN/CN)1; BUY, £0.65: Egypt & Morocco Operations Update | Sound Energy (SOU LN) (not covered): Preliminary volume estimates in Morocco
SDX has raised US$40 mm in a placing at £0.30/sh to fund the US$30 mm acquisition of Circle Oil’s oil & gas exploration and production assets in Egypt & Morocco. This adds 2,600 boe/d (3Q16) of WI production in Egypt and c. 4.5 mmcf/d (750 boe/d) of WI production in Morocco. It also adds 3.8 mmboe of WI 2P reserves (YE15) in Egypt (mainly oil) and 0.9 mmboe of WI 2P (gas) in Morocco. Post-transaction net production increases to almost 5 mboe/d (GMP FEe 1Q17) and net 2P reserves to c. 8 mmboe. SDX receives US$16mm in receivables which we have conservatively excluded from our valuation pending visibility on payment mechanism but could well provide further upside. The transactions are very accretive and our target price has increased by 30% to £0.65/sh even after the effect of dilution.
Ascent Resources (AST LN) (not covered): Result of flow test in Slovenia | IGas Energy (IGAS LN) (not covered): Mandatory redemption offer to secured bondholders | SDX Energy (SDX LN/CN)1 ; BUY, £0.65: Game-changing acquisition continues aggressive expansion in North Africa | Genel Energy (GENL LN); SPEC. BUY, £1.50: Residual payment for June 2016 export in Kurdistan | Seplat Petroleum (SEPL LN); SPEC. BUY, £1.50: Court Proceedings relating to US$20.5 mm in escrow | Asset Forfeiture in Nigeria
SDX Energy’s accretive $30m acquisition of the Egyptian and Moroccan assets from Circle Oil is a major step to increase the company’s footprint and is in line with its stated ambition to grow (in)organically. The Moroccan gas production in particular is a step-out from its existing base, but provides strong cash flow generation, quick effective payback and the possibility of future high-value development and exploration. The increased working interest in NW Gemsa should boost SDX’s share in FCF in Egypt, and further contribute to costs for the upcoming waterflood programme. We increase our core NAV from 39p/share to 42p/share (RENAV moves from 68p/share to 57p/share) even after some (unrelated) modelling adjustments. Despite a recent increase in the shares, this suggests further upside for investors in a larger company with greater ability to invest in high-value projects in North Africa.
SDX Energy released its Q3 2016 results on Friday with the company reporting a small profit of US$0.1 million in the quarter. More importantly, on the operational side the company remains on track. On its Meseda licence, management is completing its final technical review and has started to tender for equipment to increase the facility capacity to allow a doubling of production in 2017. On the South Disouq exploration licence, interpretation of the 3D seismic data is progressing well and initial interpretation has thrown up encouraging signs with a first exploration well expected to be drilled early 2017. Additionally, the company has net cash of US$5 million, leaving it well placed to take advantage of acquisitions that might arise.
Ithaca Energy (IAE LN/CN)6; BUY, £1.30: First oil at Stella delayed by one month on minor electrical problems | Europa Oil & Gas (EOG LN) (not covered): Sale of interest in Wressle in the UK | Exillon Energy (EXI LN) (not covered): October Production in Russia | SDX Energy (SDX CN/LN)1 : Buy, £0.50; 3Q16 Results in Egypt | Sound oil (SOU LN) (not covered): Ne issue of Equity larger than anticipated | Weekly Crude Oil Cut
SDX Energy has released an operations update. Further interpretation of its 3D seismic data on the South Disouq exploration licence, onshore Egypt, has identified several prospects on the licence. SDX has a 55% working interest in this licence. These all display strong AVO responses. This will not only de-risk the prospectivity of the area but also provide shareholders with additional upside, should the initial exploration well in Q1 2017, prove to be successful. To reflect the exciting potential, the management has confirmed that there is significant industry interest with a number of enquiries about farming into the licence.
Parex Resources (PXT CN)4; BUY, C$24.00: reports 3Q16 results and bullish 2017 outlook | Ithaca Energy (IAE LN/CN)6 ; BUY, £1.10: 3Q16 Results | Valeura Energy (VLE CN)1, 6; BUY, C$1.75: 3Q16 results overshadowed by the previously announced transactions that are expected to close by year-end 2016e | Condor Petroleum (CPI CN)8 ; BUY, C$3.75: Condor reports 3Q16 results and upcoming drilling catalysts | Jersey Oil & Gas (JOG LN)1 ; UNDER REVIEW: Exploration well in the UK confirmed | SDX Energy (SDX LN/CN) 1 ; Buy, £0.50: Well location identified at South Disouq in Egypt | Sterling Energy (SEY LN)(not covered): IMS
Seismic data surpasses expectations. SDX Energy has updated the market on its initial findings from the interpretation of the 3D seismic data that was acquired over its South Disouq permit in H1 2016. Having received the Pre-Stack Time Migrated (PSTM) data in mid September, the quality of the data set has surpassed expectations. Not only has it identified numerous leads and prospects in the Abu Madi formation (as expected), but early stage analysis has also identified a deeper oil bearing potential in the block. At this stage Management has not altered its existing risking and volumes. However, Investors should be aware of the increasing prospectivity of the area and the potential upside in the event of exploration success.
SDX Energy has announced the initial findings from the seismic data acquired over South Disouq. The first pass (PSTM) post stack time migration has surpassed pre-acquisition expectations, allowing the company to assess horizons not previously assessed, importantly including those that are oil bearing in other blocks. The company expects to continue its assessment of data to refine the numerous prospects and leads already identified before a fully-carried exploration well in late 2016/early 2017. Once a target is identified we expect to update our core NAV (unchanged for the moment at 39p/share). Our RENAV, including a nominal 65mmboe prospect at South Disouq, is 72p/share.
Market Reaction: Neutral. The lower than expected cash is due to an increase in receivables where we had carried a small decrease. However, we understand that a significant portion of these have been received postreporting period.
SDX Energy has reported its Q2 2016 results this morning. Although the numbers were impacted by a large non-cash exploration impairment charge (in line with our estimates), the company would appear to be in fine fettle. The strong balance sheet and high margin production provide an excellent base for management to start to build the business both organically and through acquisitions.
SDX Energy is in a very strong position. With its listing in London the company raised US$10 million (net of expenses). This coupled with its high margin production in Egypt leaves the company in a position where management are able to start to build the business both organically and through acquisitions.
SDX Energy (SDX) is a London/Toronto-listed company with interests in two producing onshore fields in Egypt. Crucially for a small E&P, it will be cash flow positive in 2017 and is unlikely to return to the market for more equity to develop assets. The current work programme (of new wells, workovers and water flood) could see a more than doubling of recoverable volumes and is both cheap and relatively low risk. Once this work starts to bear fruit (later in 2016/17), the low-cost production will put SDX in the enviable position of being able to largely fund development of exploration prospects, while giving it resources and operational credibility to add further assets in Egypt. Our analysis indicates that the share price is more than supported by current operations, giving upside potential for the near-term production increases we see as likely and free exposure to exploration upside.
Market Reaction: Neutral. The decision to avoid an additional well commitment here is sensible in our view. After the previously announced well results, we had not included any value for Bakassi West, Cameroon, in our valuation.
Market Reaction: Neutral. We await the results of the data processing.
Market Reaction: neutral. While production at Gemsa is a bit light this quarter, Operations are on track and Receivables have dropped by US$1.0 mm since the end of December.
SDX Energy has raised c.US$11 mm through an equity private placement priced at C$0.33/sh (c.£0.18/sh).
The Manatee-1 exploration well in Cameroon only encountered gas of varying quality throughout the wellbore. There were also oil shows, suggesting the presence of oil somewhere in the system. Pending further analysis on the well results and combined with previous gas discoveries (250-500 bcf) on the block, an additional well could potentially be considered to derisk a total of 1 tcf, which would be the minimum threshold for a FLNG or CNG development. Pending further details, we have taken the cautious approach to remove the Manatee-1 well C$2.11 per share contribution from our ReNAV. Our new ReNAV stands at C$1.76 per share. We maintain our Outperform recommenda on on SDX Energy with a target price reduced from C$3.70 to C$1.80 per share. The shares con nue to o er value.
Market Reaction: neutral. The Company's 3D seismic programme at South Disouq (SDX 55% WI), onshore the Nile Delta in Egypt, has commenced. It is expected to take approximately three months after which a 3-4 month period of processing and interpretation will be undertaken which will help inform the selection of a location for a high impact exploration well forecast to be drilled in 4Q16.
Market Reaction: Neutral. This well has the potential to be transformational for the Company as it has a gross target of 108 mmbbl of oil. Drilling has commenced on the Company's high impact exploration well (WI 35%), Manatee-1, on Bakassi West, Cameroon and is expected to take up to 45 days. 13 prospects and leads have previously been identified from 2D seismic on the concession. The operator believes the location of Manatee-1 has strong geological similarities to the adjacent Abana Field which has reported recoverable reserves of 85 mmbbl of light crude oil.
Market Reaction: Positive. The NW Gemsa field's current net production of 903 boe/d is higher than our expectations. The Company's expectation of production remaining flat at these levels in 2016 is much higher than what we had forecasted (FCCe 615 bbl/d). There is also a possibility that this could add reserves, assuming that the reservoir is connected to the main zones.
Market Reaction: Neutral, there is nothing materially new in these results.
Market Reaction: Neutral.
Sea Dragon Energy has merged with Madison PetroGas with the combined entity renamed SDX Energy. It now has c. 4.9 mmboe (WI) 2P reserves and c. 1.5 mboe/d production. With a new, very motivated and competent board, the combined entity benefits from improved materiality, a stronger balance sheet and the scale to aggressively grow organically and inorganically its operations in Egypt where the overall business environment is improving. Domestic gas prices are increasing and companies are now getting paid. In addition, SDX Energy’s existing assets are very low cost (less than US$5/boe opex) with very few commitments. The Company can therefore withstand a continued period of low oil prices. SDX Energy also offers a high impact portfolio of appraisal and exploration opportunities in Egypt and Cameroon ranging from waterflood activities to boost recovery factor to exploration drilling.
SDX Energy Inc. (SDX) (Formerly Sea Dragon Energy): On the Rise in Egypt
Sea Dragon Energy is merging with Madison PetroGas. Should the deal close in early October, this would provide the new combined entity, to be named SDX Energy, with improved materiality, a stronger balance sheet and the scale to grow its operations in Egypt. The Company would also offer a high impact portfolio of exploration opportunities in Cameroon and Egypt. Prior to any finalisation of the deal, we maintain our Speculative Buy recommendation and C$0.10 per share target price.
Market Reaction: Positive. This improves Sea Dragon's materiality, cash position and gives it the scale to grow its operations in Egypt.
