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.
SDX Energy has already identified 15 leads and at least two drillable gas and oil bearing prospects (Osiris-1X and Anubis-1X). The quality of the data (captured across 300km2 of 3D) is better than expected and has allowed identification of deeper (oil bearing) potential within the area. Our modelling of a 68mmboe gas/condensate prospect at South Disouq will be updated once further detail is released, and would benefit if a sizeable target in the oil window could be drilled, which this seismic interpretation opens up as a possibility. South Disouq’s location is such that even in the event of a large gas discovery, development could be both quick and relatively cheap (a major pipeline crosses the block).
We leave our core NAV and RENAV unchanged at 39p and 72p respectively. In our initiation report, we noted that SDX Energy provides a healthy mix of production (cashflow positive down to very low oil prices) and development/exploration upside. We also note the recent strengthening of the board to include Mark Reid (CFO since 2015) and Michael Raynes as a non-exec director (a director of MEA Energy, a significant shareholder).