SDX Energy Announces 30 June 2022 Trading & Operations Update

Source: 8/1/2022, Location: Africa

- Increased production guidance: Group 2022 entitlement production guidance is increased to 3,480 - 3,795 boe/d from 3,330 - 3,550 boe/d
- US$1.8 million increase to 2022 mid-point capex guidance.
- Net Cash position of US$12.8m (unaudited) as of 30 June 2022
- With the introduction of Aleph Commodities Limited as a new cornerstone shareholder, a strategic review and expansion plans are being formulated with a focus on increased production, reserves and shareholder returns.

SDX Energy Plc (SDX) provides an update on production and capex guidance for 2022 following drilling success at South Disouq and provides an update on its unaudited capex, cash, and liquidity position for the six months ended 30 June 2022. All monetary values are expressed in United States dollars net to the Company unless otherwise stated.

Mark Reid, CEO of SDX, commented:

"Following on from our previously announced drilling success at SD-5X in South Disouq, which also includes a richer than expected condensate yield, I am pleased to announce that our 2022 production guidance for this asset is being increased by 15%. Although we have had to slightly reduce our West Gharib production guidance due to mechanical issues with one of the rigs, our overall 2022 group mid-point guidance has increased to 3,480 - 3,795 boe/d from 3,330 - 3,550 boe/d. Given that both the SD-5X and MA-1X wells in South Disouq encountered gas, we have also slightly increased our capex guidance by US$1.8 million, reflecting the costs of completing and testing these wells and tying in SD-5X. I am also pleased to report continued strong production of 3,742 boe/d in the first half of the year which is above our increased 3,638 boe/d mid-point entitlement guidance, and a robust net cash position of US$12.8 million as at 30 June 2022. Finally, we are working with our new cornerstone shareholder Aleph Commodities Limited on a refreshed and ambitious strategy and we will be updating the market on the outcome of this in the weeks ahead."

2022 Production and Capex guidance revisions
- Group 2022 entitlement production guidance is increased to 3,480 - 3,795 boe/d from 3,330 - 3,550 boe/d for the reasons outlined below.
- Following the successful drilling and production testing of the SD-5X well, gross 2022 production guidance for South Disouq has been revised upward to 38-40 MMscfe/d from 33-35 MMscfe/d, a 15% mid-point guidance increase. On a net entitlement basis, the new guidance is 2,500-2,700 boe/d, increasing from 2,280-2,420 boe/d.
- As disclosed previously, the SD-5X well is currently producing greater amounts of condensate (gross 100-110 bbl/d) than were expected pre-drill (gross 25-30 bbl/d). As South Disouq condensate is sold at 90% of Brent price, this product is highly cash-generative in the current pricing environment, with Netbacks of US$60.93/boe for the six months ending 30 June 2022.
- Due to drilling delays resulting from mechanical issues experienced with one of the rigs working on the 13-well West Gharib drilling campaign, gross 2022 production guidance has been revised downwards to 2,000-2,450 bbl/d from 2,200-2,650 bbl/d, an 8% mid-point decrease. On a net entitlement basis, the new guidance is 380-470 boe/d, decreasing from 420-505 boe/d.
- Morocco production guidance remains unchanged at gross 4.8-5.0 MMscf/d, 600-625 boe/d net entitlement.
- Following the successful drilling, completion testing and tie in of SD-5X, and the drilling, completion and testing of the MA-1X exploration well, both of which were previously assumed to be dry holes for capex guidance purposes, South Disouq capex guidance has been revised upward from US$6.7-7.2 million to US$8.5-9.0 million.
- West Gharib capex guidance range has been revised downward by US$0.5 million reflecting drilling delays, with updated guidance of US$4.0-4.5 million. Morocco capex guidance is unchanged, meaning group capex guidance is now US$25.5-27.0 million, versus previous guidance of US$23.7-25.2 million.

Trading and operations update six months to 30 June 2022

- Average entitlement production as at 30 June 2022 of 3,724 boe/d, which was 2% higher than the increased mid-point 2022 market guidance of 3,638 boe/d.
- Production of 3,724 boe/d for the first half of the year, which is above our increased 3,638 boe/d mid-point entitlement guidance, was driven by strong performances in Morocco and at South Disouq, with West Gharib's production lower than expected due to the mechanical issues with a previous rig that is in the process of being replaced. West Gharib production is expected to increase in the second half of the year.
- In South Disouq, the planned three-well drilling campaign has been successfully completed. SD-5X and SD-12_East have been brought online ahead of schedule and are now contributing to production and cash flow. The MA-1X gas discovery well is in the process of being evaluated to determine a commercialisation strategy for the discovery.
- In West Gharib the MSD-21, -25 and -24 wells have been successfully completed and are on production. The completion of operations of the MSD-23 well was announced on 15 July and MSD-27 spudded on 21 July. Operations at the MSD-20 well are expected to recommence in August 2022.
- In Morocco, preparations continue for the recommencement of the drilling campaign that was suspended in December 2021. The first of up to seven wells to be drilled in the next year is expected to spud in late July 2022.

- Capex as at 30 June 2022 of US$12.2 million, reflects:
- US$7.4 million for the three-well drilling campaign at South Disouq split between: US$2.0 million for the drilling, completion, testing and tie in of the SD-5X well, US$3.0 million for the drilling, completion and tie in of the SD-12_East well and US$2.4 million for the drilling, completion and testing of the MA-1X well. US$0.3 million has been spent on a workover of SD-3X to replace the production tubing.
- US$2.4 million of pre-drilling and preparation costs associated with the re-commencement of the Moroccan drilling campaign, US$0.3 million on the SAH-4 well recompletion and US$0.3 million of infrastructure works; and
- US$1.5 million of West Gharib drilling costs across the MSD-20, -21, -23, -24, and -25 wells.

Cash and liquidity

- The Company's net cash position as at 30 June 2022 was US$12.8 million, with cash balances of US$15.3 million offset by US$2.5 million drawn debt from the EBRD facility. As a result of various geopolitical factors, US dollar transfers by the Central Bank of Egypt have been delayed. Under the existing facility with the European Bank of Reconstruction and Development ("EBRD"), US$3.2 million of additional undrawn lines remain available to the Company.
- Together with cash generated from operations, the Company is fully funded for all its stated objectives in 2022.

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