SDX Energy Plc (SDX), the MENA-focused oil and gas company, is pleased to provide the following update on its drilling operations in Morocco and Egypt.
The LMS-2 well (SDX 75% working interest) has been drilled to a measured depth of 1,190 metres, and the Company is pleased to advise that electric logging has shown that a 10.6 metre net gas reservoir with 30.9% porosity has been encountered on prognosis at the base of the H9/Srafen formation. Unlike previous gas discoveries in the south of the acreage, analyses while drilling indicated that the different thermogenic composition of the gas suggests that it is from a new and likely deeper source rock. The well has been cased and completed and, when changes to Covid-19 restrictions make it possible to bring a well testing crew into the country, it will be perforated and tested to determine its potential.
The SD-12X (Sohbi) well at South Disouq in Egypt (SDX 55% working interest, 100% working interest in this well) has commenced drilling operations.
Sohbi is expected to a reach its targeted depth of approximately 2,300 metres in late April and is targeting gross P50 unrisked prospective resources of c.33 bcfe, as estimated by management. Sohbi's primary target is in the same Kafr el Sheikh formation that the Company's existing Ibn Yunus well is already producing from.
If successful, the Sohbi well would be tied in during 2021 via a 5.8 kilometre tie-in to the Ibn Yunus-1X location where an existing flow-line connects to the South Disouq Central Processing Facility. On a gross basis, this tie in cost is estimated at US$3.5 million. The 33 bcfe gross P50 unrisked resource targeted by Sohbi would potentially only require one further development well. SDX will drill the Sohbi well at a 100% working interest for an estimated gross dry hole cost of US$2.3 million which will be paid over the coming three months. Under Clause 8.5 of the Joint Operating Agreement, 'Premium to Participate in Exclusive Operations', if the Company's partner elects to participate in the well after a discovery is made, it is required to pay its full share of the well cost, plus a premium of a further 300% of this amount.
Mark Reid, CEO of SDX, commented:
"We are encouraged with the initial results at LMS-2 in Morocco, however, we require this well to be perforated and tested before we can understand its potential.
Sohbi is an exciting well for the Company, targeting the same productive formation we are already producing from in Egypt and if successful, it has the potential to extend the current plateau production of 50 MMscfe/d to 2024.
I look forward to providing further updates on both wells and our plan for future drilling in due course.
The Company remains well funded with US$11.0 million of cash as at 31 December 2019 and US$7.5 million of debt available in our EBRD credit facility. Furthermore, even at an oil price assumption of $55/bbl, approximately 80% of 2020 and 90% of 2021 forecast cash flows are estimated to come from our fixed price gas businesses in Egypt and Morocco. Given the above, we are positioned strongly to continue to weather the current fall in oil prices."
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