REG - SDX Energy PLC - Half-year Report
30/09/2024 07:00
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RNS Number : 1200G SDX Energy PLC 30 September 2024
THE INFORMATION CONTAINED WITHIN THIS ANNOUNCEMENT IS DEEMED BY SDX TO
CONSTITUTE INSIDE INFORMATION AS STIPULATED UNDER THE MARKET ABUSE REGULATION
(EU) NO. 596/2014 ("MAR"). ON THE PUBLICATION OF THIS ANNOUNCEMENT VIA A
REGULATORY INFORMATION SERVICE ("RIS"), THIS INSIDE INFORMATION IS NOW
CONSIDERED TO BE IN THE PUBLIC DOMAIN.
30 September 2024
SDX ENERGY PLC ("SDX" or the "Company")
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2024
SDX Energy plc announces its unaudited interim results for the six months
ended 30 June 2024.
The Consolidated Financial Statements of the Group for the six months ended 30
June 2024, containing full financial statements that comply with IFRS, is now
available on the Company's website.
Chairman's Review
The first half of 2024 saw SDX continue to build on its strategy to be a
best-in-class energy producer. With the sale of the Company's West Gharib
assets in Egypt, the continuation of our trade-based financing and
(post-period end) the re-negotiation of the convertible loan, we have taken
large steps in turning the prospects of the business around.
The focus during 1H 2024 was predominantly the sale of the West Gharib assets,
which represented a milestone in the execution of SDX's growth strategy in
Morocco, where the Company is the sole independent gas producer. The Executive
team and board of directors are focused on delivering long term sustainable
value for shareholders.
Finance
In April 2024, SDX received the first instalment of the West Gharib sales
proceeds and repaid in full the outstanding secured EBRD reserves-based
lending facility amounting to $2.7 million.
The Company's syndicated unsecured convertible loan agreement with Aleph
Finance Ltd (the "Lender") was amended in April 2024 to extend the draw down
period. This granted the Company access to further gross funding of $0.75
million, which was drawn down in April 2024 to pay service providers in
relation to Moroccan drilling activities and general corporate expenses.
Post-period end, in September 2024, the Lender and the Company agreed to amend
the terms of the existing convertible loan (the "Amended Facility Agreement").
Under the terms of the Amended Facility Agreement, the Lender will provide a
term loan facility in the amount of up to $6,500,000, such total amount to be
confirmed by the Lender (the "Loan"), to the Company to be repaid by 23 July
2025. Following repayment of the existing convertible loan, the Company
intends to draw on approximately $2.0 million of the remaining balance of the
Loan. Following the repayment of existing financial indebtedness owed by the
Company to the Lender under the existing convertible loan and other
agreements, the Company will apply the balance of the monies borrowed under
the Amended Facility Agreement towards capital expenditure in Morocco and
general corporate creditors. The Loan will be secured against the Company's
shares in SDX Energy Morocco (Jersey) Ltd and Sea Dragon Energy (Nile) B.V.
and a debenture over the Company, including assignment of intercompany loans
and security over HSBC bank accounts in England and various receivables. On
14 October 2024, the Company plans to convene a general meeting to ask
shareholders to vote on the Amended Facility Agreement (the "General
Meeting"). The completion of the Amended Facility Agreement is conditional
upon the Company's shareholders voting in favour of the resolutions at the
General Meeting.
Additionally, CITIC Dicastal subsidiary, DIKA MOROCCO AFRICA ("DMA"),
continued to prepay each quarter for gas deliveries during Q1, Q2 and Q3 in
Morocco.
Operations
During the first half of 2024, in Morocco, the Company produced approximately
407 million cubic feet (68,000 barrels of oil equivalent), averaging
2.3 MMscf/d (1H 2023: 581 million cubic feet averaging 3.2 MMscf/d).
In January 2024, we tied-in the Ksiri-21 ("KSR-21") well in Sebou Central of
the Gharb Basin, Morocco and, in April 2024, we received the necessary
approvals to commence production of gas. In April 2024, we also commenced
drilling the Beni Malek-2 well ("BMK-2") in the Rharb Basin, Morocco,
approximately 1.5 km from the BMK-1 discovery well. In May 2024, we completed
operations at BMK-2, encountering a 9-metre interval that demonstrated strong
gas shows of up to approximately 100 times background gas readings. The well
has been left temporarily suspended with a plug set to allow the well to be
sidetracked.
Despite challenging capital market conditions and the Board's focus on
completing complex transactions, SDX has successfully delivered on the aims of
its drilling campaign, with a new well, KSR-21, entering production at the
beginning of the year and a new well at BMK-2. The Company is making solid
progress towards its goal of transitioning into a hybrid energy producer and
infrastructure operator, providing gas to a region with an urgent need to fuel
its continued growth.
The Atlantic Free Zone and Kenitra industrial region are of strategic
importance not only for SDX, but also for Morocco's long-term growth plans. As
the sole independent gas producer in Morocco, and the operator of local
pipeline infrastructure, the Board believes SDX is uniquely positioned to
power a region that has experienced double-digit growth year-on-year and a
commensurate increase in energy demand. We continue to work closely with our
partners in the region, including CITIC Dicastal's Moroccan subsidiary, part
of a trillion-dollar global group.
To conclude, we thank our shareholders and all our stakeholders for their
continued support over this period of transformation and transition for the
Company. We maintain our promise to work diligently and energetically to
revitalise SDX and leverage the unique position in which the Company finds
itself to create significant, sustainable value for our shareholders.
Jay Bhattacherjee
Non-Executive Chairman
27 September 2024
Review of operations
MOROCCO
The Company's Moroccan acreage (where SDX has a 75% working interest and is
operator) consists of three petroleum agreements in the Rharb Basin in
northern Morocco: Sebou Central, Rharb Occidental and Lalla Mimouna Sud.
The Sebou Central petroleum agreement is a 105 km(2) exploration permit with
several exploitation concessions contained within it. The exploitation
concessions that remain active under the Sebou and Sebou Central petroleum
agreement are:
• Ksiri Central, expiry January 2025
• Sidi Al Harati Ouest, expiry October 2024
• Sidi Al Harati Nord, expiry September 2025
• Gaddari Nord, expiry October 2025
• Oulad N'Zala Central, expiry May 2025
• Ksiri Ouest, expiry October 2026
In September 2021, according to the regulations governing petroleum
agreements, SDX relinquished 25% of the original Sebou Central acreage and
entered into a 2.5 year extension period of the exploration permit. In March
2024, SDX relinquished an additional 10% of the permit area and entered into a
Second Extension Period of 1.5 years with expiry in September 2025.
The Rharb Occidental petroleum agreement is an 806 km(2) exploration permit
with numerous prospects and leads already identified on the existing 3D
seismic. The exploitation concessions that remain active under the Rharb
Occidental petroleum agreement are:
• Beni Malek Sud-Est, expiry January 2026
• Oulad Youssef Central, expiry August 2025
• Gueddari Sud Ouest, expiry December 2024
• Sidi Al Harati Sud, expiry December 2024
The Company has held the Lalla Mimouna Sud permit since February 2019. A one
year force majeure extension to the "Initial Period" of 2.5 years was granted
by the Ministry of Energy, which expired in September 2022. SDX has entered
into the "First Extension Period" of 2.5 years, expiring in March 2025. The
Lalla Mimouna Sud concession is now a 629.9 km(2) permit.
All of the Petroleum Agreements remain valid until expiration of the last
exploitation concession granted under the relevant Petroleum Agreement.
The Company was awarded the Moulay Bouchta Ouest exploration permit in
February 2019 for a total period of eight years. A one-year force majeure
extension to the "Initial Period" of the permit was granted by the Ministry of
Energy, which expired in September 2023. An extension of 6 months to this
period was granted by the Ministry of Energy, which expired in March 2024. We
have not sought a further extension and therefore the concession is in process
of being relinquished.
1H 2024 Activity
Testing and completion was concluded on the new BMK-1 well in January 2024,
combined with the successful connection of the ONHYM pipeline, which connects
this well and the surrounding area to our existing infrastructure. BMK-1
commenced production in late January 2024.
By late April 2024, KSR-21 commenced production and the BMK-2 well had been
drilled to its total depth of 1,412 metres. BMK-2 has been left temporarily
suspended with a plug set to allow the well to be sidetracked, to the target
formation at 1,265 metres, once the required equipment has been mobilised. No
workovers were conducted in 1H 2024.
For the six months period ended 30 June 2024, Morocco gross production was
approximately 407 million cubic feet (68,000 barrels of oil equivalent),
averaging 2.3 MMscf/d (1H 2023: 581 million cubic feet averaging 3.2 MMscf/d).
2H 2024 Outlook
SDX has identified two new drilling locations and is in the final stages of
securing land permits for each. The newly processed seismic data has been
integrated into the original interpretations, further de-risking both
prospects, designated as KSR-22 and OLME-A. SDX plans to commence its next
drilling campaign during Q4 2024. Gas from these wells will supply our
existing customers to serve their expanding needs.
We are currently in discussion with ONHYM in relation to agreeing future
permit requirements, which include undertaking new 3D seismic work either in
late 2024 or early 2025.
SDX is preparing a tender process to select a partner for the acquisition of
over 150 km(2) of 3D seismic data. The area selected for this new seismic
acquisition campaign is to the north-west of the existing newly merged seismic
surveys and has been strategically placed to allow SDX to tie-in to its
existing pipeline infrastructure, merge into the newly merged data set while
covering a thicker and prospective portion of the basin. SDX anticipates
finalising the tender and commencing the seismic acquisition in Q1 2025. The
EIA for this project commenced in July and is expected to be completed during
Q4 2024.
EGYPT (HELD FOR SALE)
South Disouq
South Disouq is a 115 km(2) concession located 65 km north of Cairo in the
Nile Delta region. It is on trend with several other prolific gas fields in
the Abu Madi Formation.
Development leases have been granted for South Disouq (18 km(2)), Ibn Yunus
(24 km(2)), and Ibn Yunus North (32 km(2)), and all development leases are
operated by SDX. Production is currently from the Messinian-aged Abu Madi and
Pliocene-aged Kafr El Sheikh formations. In addition, SDX operates the
Amendment Concession Agreement Area, which is an exploration permit of
41 km(2).
At the beginning of 2022, SDX held a 55% interest in the South Disouq and Ibn
Yunus development leases and a 100% interest in the Ibn Yunus North
development lease. Its partner, IPR, holds a 45% interest in the South Disouq
and Ibn Yunus development leases. In February 2022, it was announced that SDX
sold 33% of the shares in the entity that holds its interests across its South
Disouq concession to Energy Flow Global ("EFG"), a private company with
upstream and oilfield services activities in Egypt, the Middle East and Asia.
In February 2023, SDX re-acquired these shares in exchange for a 33% direct
share of the leases. After this transaction, SDX Energy still has an effective
36.9% working interest in the South Disouq and Ibn Yunus development leases
and a 67.0% working interest in the Ibn Yunus North development lease.
1H 2024 Activity
Analysis of the exploration MA-1X well on Mohsen has been completed and the
Company is evaluating next steps.
West Gharib
West Gharib is 22 km(2) in area and is producing from the Meseda and Rabul
fields, both of which are included in the Block-H development lease. The
concession is covered by a production service agreement, which allows for
lower cost operations than the traditional joint venture structure. SDX had a
50% working interest in the operation, with Dublin International Petroleum,
the operator, holding the remaining 50% working interest.
The Meseda field produces 18(o) API oil from the high-quality Miocene-aged Asl
sands of the Rudeis formation. The Rabul field produces 16(o) API oil from the
Miocene-aged Yusr and Bakr sands, which are also part of the Rudeis formation.
In 2021, a 10-year extension for both Meseda and Rabul was agreed with GPC,
extending the licence to 9 November 2031. As part of the agreement, the
contractors have a minimum commitment to drill six infill development wells
(four in Meseda and two in Rabul) and one water-injection well in Rabul by
31 December 2022, and up to another six wells across the concession
depending on the prevailing oil price. To take advantage of low drilling costs
and the current oil price environment, however, the partnership planned to
drill 13 infill development wells from 2022 onwards.
1H 2024 Activity
The infill campaign has continued in 2024.
Workovers of the existing wells have continued in 2024 to maximise production
and recovery from the Meseda and Rabul Fields.
2024 Outlook (EGYPT)
Due to issues in relation to currency controls and ongoing devaluations of the
Egyptian Pound, it was determined during 2023 that it would be better to focus
our resources on our Morocco operations. Therefore, offers for our interests
in South Disouq and West Gharib were entertained, and by 31 December 2023 we
had entered into advanced negotiations on both assets.
On 19 April 2024, the sale of our interest in West Gharib had been finalised,
and we continue to evaluate options to maximise shareholder value for South
Disouq, including a sale of the asset or potentially developing it. As part of
the West Gharib sale, our investment in Brentford Oil Tools has also been
sold. All revenues and costs in relation to these operations have been treated
as discontinuing activities in the accounts for the six months period ended
30 June 2024 - the Balance Sheet impact is that the relevant Group Assets
and Group liabilities have been reclassified as being Held for Sale.
Environmental, Social and Governance ("ESG")
1H 2024 ESG METRICS
• The Company's operated assets recorded a carbon intensity of 8.8kg
CO(2)e/boe in 1H 2024 (1H 2023: 4.5kg CO(2)e/boe).
• Scope 1 greenhouse gas emissions from all operated assets were 4,800 tons
of CO(2)e (1H 2023: 5,400 tons of CO(2)e). Scope 3 greenhouse gas emissions
in Morocco were 24,800 tons of CO(2)e (1H 2023: 30,100 tons of CO(2)e),
which is approximately 11,300 tons of CO(2)e (1H 2023: 13,800 tons of
CO(2)e) less than using alternative heavy fuel oil.
• There were no Lost Time Injuries at any of the Company's assets during 1H
2024 (1H 2023: none).
• No produced water was discharged into the environment in Morocco or at
South Disouq (100% processed or evaporated).
• There were no hydrocarbon spills at operated assets (1H 2023: nil).
• The Company continues to adopt high standards of Governance through its
adherence to the QCA Code on Corporate Governance.
Financial Review
Discontinued activities
As at 31 December 2023, the Group had committed itself to the sale of its
Egyptian operations. This has translated into the completion of the sale of
its 50% holding in Brentford Oil Tools and its interest in the West Gharib
concession on 19 April 2024 and a commitment to sell its interest in the
South Disouq concession later in 2024 or 2025.
In effect, this renders the Group's entire Egyptian operations as discontinued
as at 30 June 2024, and requires their results to be treated as such in the
Consolidated Statement of Comprehensive Income and the Consolidated Statement
of Cash Flows for the period ending 30 June 2024 and related comparatives
under IFRS 5 "Disposal of subsidiaries, business and non-current assets".
Further details, including the results of these discontinued operations, can
be found in note 23 to the Consolidated Financial Statements.
Operational and Financial Highlights
Unless specified, all matters discussed going forward in this Financial Review
will refer to the Group's continuing operations (in Morocco) only. In
accordance with industry practice, production volumes and revenues are
reported on a Group interest basis, before the deduction of royalties.
Six months ended 30 June
$'000s 2024 2023
Morocco gas sales revenue 4,767 4,901
Royalties 541 (51)
Net Morocco gas sales revenue 5,308 4,850
Total net revenue 5,308 4,850
Direct operating expense (491) (1,169)
Netback: Morocco gas 4,817 3,681
Netback (pre-tax) 4,817 3,681
EBITDAX 2,651 1,673
Morocco gas sales (boe/d) 254 383
Total sales volumes (boe/d) 254 383
Morocco gas sales (boe) 46,171 69,249
Total sales volumes (boe) 46,171 69,249
Realised Morocco gas price (US$/mcf) $17.21 $11.80
Realised Morocco gas price (US$/boe) $103.24 $70.77
Royalties (US$/boe) -$11.71 $0.74
Operating costs (US$/boe) $10.63 $16.88
Netback (US$/boe) $104.32 $53.15
Capital expenditures 7,625 2,870
Morocco gas sales revenue
The Group currently sells natural gas to seven industrial customers in
Kenitra, northern Morocco.
Morocco gas sales variance from prior year
For the six months ending 30 June 2024 (compared to the six months ending 30
June 2023), the decrease in Morocco gas sales revenue of $0.1 million was
mainly as a result of a $1.6 million decrease in production due to our
producing wells getting older in general despite new wells (BMK-1 and KSR-21)
commencing production during the period. The group is seeking to accelerate
the number of wells being brought into production in 2024. This was partially
offset by a favourable price variance of $1.5 million, which was caused by
increases in gas prices and increased sales to higher-priced contracts.
$'000s
Six months ended 30 June 2023 4,901
Price variance 1,499
Production variance (1,633)
Six months ended 30 June 2024 4,767
Royalties
In Morocco, sales-based royalties become payable when certain
inception-to-date production thresholds are reached, according to the terms of
each exploitation concession. Royalties were a net credit of $0.5 million in
the six months ending 30 June 2024 due to a reassessment of the historic
liability, which was also impacted by favourable foreign exchange rate
movements during the period.
Direct operating costs
Direct operating costs for the six months ending 30 June 2024 were $0.5
million, compared to $1.2 million for the comparative period.
The direct operating costs for concessions that are continued operations were:
Six months ended 30 June
$'000s 2024 2023
Morocco 491 1,169
Total direct operating expense 491 1,169
The direct operating costs per unit for concessions that are continued
operations were:
Six months ended 30 June
US$/boe 2024 2023
Morocco 10.63 16.88
Total direct operating costs per boe 10.63 16.88
Morocco
Operational expenditure in Morocco is less dependent on production than in
many other hydrocarbon-producing countries, as much Moroccan operational
expenditure is fixed in nature, e.g. headcount and compressor/separator
rentals, and might be impacted by expenditure that is one-off in nature.
Direct operating costs for the six months ended 30 June 2024 were $0.7 million
lower compared to the comparative period due to newer wells (requiring less
maintenance) entering into production during the current period. This has
caused the direct operating costs per boe to decrease by 37% to $10.63/boe for
the six months ended 30 June 2024 (in comparison to $16.88/boe for the
comparative period).
General and administrative expenses
Six months ended 30 June
$'000s 2024 2023
Wages and employee costs 836 1,388
Consultants - inc. PR/IR 218 156
Legal fees 60 57
Audit, tax and accounting services 103 140
Public company fees 178 319
Travel 103 90
Office expenses 404 208
IT expenses 56 54
Other expenses 0 0
Service recharges (32) (349)
Ongoing general and administrative expenses 1,926 2,063
Transaction costs 202 55
Total net G&A 2,128 2,118
Ongoing general and administrative ("G&A") costs for the six months ended
30 June 2024 were $0.2 million lower compared to the comparative period mainly
due to a reduction in employee-related expenditure primarily due to
significantly reduced headcount in the corporate part of the business,
partially offset by a lower G&A recharge much of which is due to these
savings and other operational efficiencies across the group.
Transaction costs increased by $0.1 million compared to the comparative period
mainly due to professional services associated with the sale in 19 April 2024
of the Group's working interest in West Gharib being incurred from from late
2023 onwards.
Capital expenditures
The following table shows the capital expenditure for the Group overall. It
agrees with notes 7, 8 and 23 to the Consolidated Financial Statements for the
period ended 30 June 2024, which include discussion therein.
Six months ended 30 June
$'000s 2024 2023
Property, plant and equipment expenditures ("PP&E") 2,150 505
Exploration and evaluation expenditures ("E&E") 5,475 2,358
Office furniture and fixtures - 7
Total capital expenditures ((1)) 7,625 2,870
(1) For continuing operations, capital expenditure was US$5.9 million for the
six months ended 30 June 2024 (six months ended 30 June 2023: US$2.2 million)
The Group has future capital commitments associated with its oil and gas
assets, details of which can be found in note 20 to the Consolidated Financial
Statements
Exploration and evaluation expense
For the six months ended 30 June 2024, exploration and evaluation expenses
stood at $4.4 million, compared to $0.1 million in the comparative period.
The current period expense relates mainly to:
· $4.5 million non-cash write off of exploration expenditure
incurred in continuing activities (Morocco) predominantly relating to the
BMK-2 well, representing the total of their book value exceeding their
recoverable amount.
· $0.1 million credit related to refunded overpayments for business
evaluation activities and reductions in provisions for obsolete drilling
inventory in Morocco.
The prior period expense relates mainly to:
· $0.1 million incurred for new business evaluation activities in
Morocco.
Depletion, depreciation and amortisation
For the six months ended 30 June 2024, depletion, depreciation, and
amortisation ("DD&A") amounted to $1.2 million, compared to the
$2.6 million in the comparative period, a reduction of $1.4 million.
Six months ended 30 June
$'000s 2024 2023
Morocco 994 2,409
Right of use assets - Continuing 165 192
Other (F&F, Computer, Office Equip) - Continuing 4 8
Total DD&A 1,163 2,609
The DD&A movement is primarily due to a $1.4 million decrease in DD&A
for Morocco mainly due to lower production as a proportion of reserves in
comparison to the comparative period, which is a consequence of lower
production in the current period and an upward revision in reserves at 31
December 2023.
Foreign exchange loss
The $0.3 million foreign exchange loss during the year is due to losses
arising from the strengthening of the Moroccan Dirham ($0.4 million) partially
offset by gains on currency conversion ($0.1 million).
Impairment expense
At the reporting date, management performed an impairment indicator assessment
of the Morocco Rharb Basin Cash Generating Unit ("CGU"), and concluded that
property, plant and equipment ("PP&E") drilling costs of $5.0 million in
relation to the '2021 drilling campaign' as at 30 June 2024 should be tested
for impairment. As a result, it determined that a $5.0 million impairment
needed to be recognised within 'impairment expense' within the Consolidated
Statement of Comprehensive Income. Please see note 7 to the Consolidated
Financial Statements for further details.
No such impairment of PP&E assets occurred in the comparative period.
Sources and uses of cash
The Group's net cash position as at 30 June 2024 was $1.4 million,
with cash balances of $5.2 million offset by $3.3 million drawn debt and
$0.5 million accrued interest from the convertible loan.
The following table sets out the Group's sources and uses of cash for the six
months ended 30 June 2024 and 30 June 2023:
Six months ended 30 June
$'000s 2024 2023
Sources
Operating cash flow before working capital movements 2,739 1,492
Changes in non-cash working capital 5,085 (2,130)
Cash generated from discontinued operations 824 1,421
Cash used in investing activities of discontinued operations 9 -
Issues of Borrowings 750 -
Total sources 9,407 783
Uses
Income taxes paid (365) 131
Property, plant and equipment expenditures (630) (255)
Exploration and evaluation expenditures (3,969) (1,390)
Repayments of Borrowings (2,564) (2,200)
Payments of lease liabilities (148) (227)
Finance income received / (costs paid) (632) 36
Cash used in financing activities of discontinued operations (5) (31)
Effect of foreign exchange on cash and cash equivalents (410) (738)
Total uses (8,723) (4,674)
Increase / (Decrease) in cash and cash equivalents 684 (3,891)
Cash and cash equivalents at beginning of period 4,476 10,613
Cash and cash equivalents at end of period 5,160 6,722
Going concern
Accounting standards in the UK require the directors to assess the Group's
ability to continue to operate as a going concern for the foreseeable future,
which covers a period of at least 12 months from the date of approval of the
Consolidated Financial Statements.
The directors reviewed the cash flow projections prepared by management for
the period ending 31 December 2025. The capital expenditure and operating
costs used in these forecasted cash flows are based on the board's best
estimate.
The principal assumptions underlying the cash flow forecast and the
availability of finance to the Group are as follows:
· The Group expects to be able to meet its licence commitments in
Morocco and Egypt. This includes drilling several wells in Morocco to ensure
continued gas supply to offtakers. The Group may need to negotiate with the
Moroccan and Egyptian authorities to revise work programmes or licence
commitments. Based on previous successful renegotiations of licence
commitments, the directors believe that this is likely to be achieved, but it
is not guaranteed.
· An offtaker prepays for gas to be supplied in Morocco during 2H
2024 (amounting to approximately $2.0 million).
· The Moroccan state confirms the release of a cash-backed
guarantee, which would enable $0.4 million of restricted cash held as
security to become unrestricted, due to the Company having completed the land
reclamation work on three wells on a licence in Morocco that has been
relinquished.
· The Group sells its remaining asset in Egypt (South Disouq) - for
sales proceeds of at least $3.0 million.
· The Group agrees a farm-in deal over its assets in Morocco
whereby a joint venture partner pays a contribution towards past costs and
funds future capital expenditure in order to earn an interest in the assets.
· The Group will continue to negotiate and reach agreements with
creditors to spread the payment of liabilities over time.
· The Group will continue to make payments to creditors in line
with agreed payment plans.
· At the General Meeting to be held on 14 October 2024,
shareholders will vote for the resolutions, which is a condition of the
existing convertible loan being renewed until July 2025 and not becoming
immediately repayable.
· The holders of the Loan will exercise their right to convert the
amount owed into Ordinary Shares in the Company instead of the Loan amount
being repaid in cash when it matures in 2025.
In reviewing the cash flow forecast and the principal assumptions above, the
Directors have also considered other alternative measures available to the
Group, including the deferral of planned expenditure, the reduction of
overhead costs and an alternative method of raising capital or debt. These
alterative measures give the Directors a reasonable expectation that the Group
will have sufficient funds to enable it to discharge its liabilities when they
fall due.
However there exists a material uncertainty that may cast significant doubt
over the ability of the Group to continue as a going concern. The Board
believes it has options to raise external capital, but cannot guarantee the
amount and timing of any proposed financing. The Board would also note that
there are no guarantees that current discussions with the potential buyers of
the South Disouq asset in Egypt and potential farm-in partners in Morocco will
be favourably concluded and that arrangement with creditors will remain
negotiable.
Notwithstanding the material uncertainty identified, the Directors have
concluded that the Group will have sufficient resources to continue as a going
concern for the period of assessment, that is for a period of not less than 12
months from the date of approval of the consolidated financial statements.
Accordingly, the consolidated financial statements have been prepared in a
going concern basis and do not reflect any adjustments that would be necessary
if this basis were inappropriate.
Non-IFRS measures
The Financial Review contains the terms "Netback" and "EBITDAX", which are not
recognised measures under IFRS. The Group uses these measures to help evaluate
its performance. Please see note 18 to the Consolidated Financial Statements
for a reconciliation of these non-IFRS measures to Operating loss, which is an
IFRS recognised measure.
Netback
Netback is a non-IFRS measure that represents sales net of all operating
expenses and government royalties. Management believes netback to be a useful
supplemental measure to analyse operating performance and provide an
indication of the results generated by the Group's principal business
activities prior to the consideration of other income and expenses. Management
considers Netback an important measure because it demonstrates the Group's
profitability relative to current commodity prices. Netback may not be
comparable to similar measures other companies use.
EBITDAX
EBITDAX is a non-IFRS measure that represents earnings before interest, tax,
depreciation, amortisation, exploration expense, and impairment, which is
operating income/(loss) adjusted for the add-back of depreciation and
amortisation, exploration expense, and impairment of property, plant, and
equipment (if applicable). EBITDAX is presented so that users of the financial
statements can understand the cash profitability of the Group, excluding the
impact of costs attributable to exploration activity, which tend to be one-off
in nature, and the non-cash costs relating to depreciation, amortisation, and
impairments. EBITDAX may not be comparable to similar measures other companies
use.
Jay Bhattacherjee
Non-Executive Chairman
27 September 2024
Consolidated Balance Sheet as at 30 June 2024
(US$'000s) As at As at
30 June 2024 31 December 2023
Assets
Cash and cash equivalents 5,160 4,476
Trade and other receivables 12,333 15,458
Inventory 6,210 7,426
Assets held for sale 4,206 10,194
Current assets 27,909 37,554
Investments - 0
Property, plant and equipment 1,442 3,174
Exploration and evaluation assets 6,906 9,688
Right-of-use assets 456 649
Non-current assets 8,804 13,511
Total assets 36,713 51,065
Liabilities
Trade and other payables 18,962 23,288
Decommissioning liability 2,337 -
Current income taxes 723 913
Borrowings 3,769 5,273
Lease liability 335 364
Liabilities held for sale 2,367 1,501
Current liabilities 28,493 31,339
Decommissioning liability 2,397 4,640
Current income taxes 882 1,202
Deferred income taxes - -
Lease liability 103 266
Non-current liabilities 3,382 6,108
Total liabilities 31,875 37,448
Equity
Share capital 2,601 2,601
Share premium 130 130
Share-based payment reserve 60 22
Accumulated other comprehensive loss (917) (917)
Merger reserve 37,034 37,034
(Accumulated loss)/retained earnings (34,070) (25,253)
Non-controlling interest - 0
Total equity 4,838 13,617
Equity and liabilities 36,713 51,065
Consolidated Statement of Comprehensive Income for the six months ended 30
June 2024
Six months ended 30 June
(US$'000s) 2024 2023
Revenue, net of royalties 5,308 4,850
Direct operating expense (491) (1,169)
Gross profit 4,817 3,681
Exploration and evaluation expense (4,426) (72)
Depletion, depreciation and amortisation (1,163) (2,609)
Impairment expense (4,966) 0
Share-based compensation (37) (72)
General and administrative expenses
- Ongoing general and administrative expenses (1,926) (2,063)
- Transaction costs (202) (55)
Operating loss (7,903) (1,190)
Finance costs (1,037) (497)
Foreign exchange loss (330) (409)
Loss before income taxes (9,270) (2,097)
Current income tax expense (1) (34)
Profit / (loss) from discontinuing operations 454 (359)
Loss and total comprehensive loss for the period (8,817) (2,490)
Attributable to
SDX shareholders (8,817) (2,490)
Non-controlling interests - -
Net profit/(loss), attributable to SDX shareholders, per share:
Basic and diluted - Continuing $(0.045) $(0.010)
Basic and diluted - Discontinuing $0.002 $(0.002)
Basic and diluted - Total $(0.043) $(0.012)
Consolidated Statement of Changes in Equity for the six months ended 30 June
2024
Six months ended 30 June
(US$'000s) 2024 2023
Share capital
Balance, beginning of period 2,601 2,601
Balance, end of period 2,601 2,601
Share premium
Balance, beginning of period 130 130
Balance, end of period 130 130
Share-based payment reserve
Balance, beginning of period 22 7,174
Share-based compensation for the period 38 72
Share-based options expired 0 (351)
Balance, end of period 60 6,895
Accumulated other comprehensive loss
Balance, beginning of period (917) (917)
Balance, end of period (917) (917)
Merger reserve
Balance, beginning of period 37,034 37,034
Balance, end of period 37,034 37,034
Retained earnings
Balance, beginning of period (25,253) (10,872)
Part repurchase / disposal of subsidiary - (842)
Share-based options expired (0) 351
Total comprehensive loss (8,817) (2,490)
Balance, end of period (34,070) (13,853)
Non-controlling interest
Balance, beginning of period - 6,258
Part repurchase / disposal of subsidiary - (6,258)
Profit /(loss) for the period - -
Balance, end of period - 0
Total equity 4,838 31,890
Consolidated Statement of Cash Flows for the six months ended 30 June 2024
Six months ended 30 June
(US$'000s) 2024 2023
Cash flows generated from operating activities
Loss before income taxes (9,270) (2,097)
Adjustments for:
Depletion, depreciation and amortisation 1,163 2,610
Exploration and evaluation expense 4,476 -
Impairment expense 4,966 -
Share-based compensation charge 37 72
Foreign exchange loss 330 410
Finance expense 1,037 497
Operating cash flow before working capital movements 2,739 1,492
(Increase) / Decrease in trade and other receivables (3,198) 550
(Increase) / Decrease in trade payables 8,395 (1,692)
Payments for inventory (112) (325)
Payments for decommissioning 0 (663)
Cash generated from/(used in) operating activities 7,824 (638)
Income taxes paid / (refunded) (365) 131
Net cash generated from/(used in) operating activities 7,459 (507)
Cash generated from discontinued operations 824 1,421
Cash flows generated from/(used in) investing activities:
Property, plant and equipment expenditures (630) (255)
Exploration and evaluation expenditures (3,969) (1,390)
Net cash used in investing activities (4,599) (1,645)
Cash generated from investing activities of discontinued operations 9 -
Cash flows generated from/(used in) financing activities:
Proceeds in respect of new loans and borrowings 750 -
Repayments in respect of loans and borrowings (2,564) (2,200)
Payments of lease liabilities (148) (227)
Finance income received / (costs paid) (632) 36
Net cash used in financing activities (2,594) (2,391)
Cash used in financing activities of discontinued operations (5) (31)
Increase / (Decrease) in cash and cash equivalents 1,094 (3,153)
Effect of foreign exchange on cash and cash equivalents (410) (738)
Cash and cash equivalents, beginning of period 4,476 10,613
Cash and cash equivalents, end of period 5,160 6,722
For further information:
SDX Energy Plc
Daniel Gould, Chief Executive Officer
William McAvock, Chief Financial Officer
Tel: +44 (0) 20 3219 5640
Shore Capital (Nominated Adviser and Broker)
Toby Gibbs/Harry Davies-Ball
Tel: +44 (0) 20 7408 4090
InHouseIR (Investor and Media Relations)
Sarah Dees/Oliver Clark
Email: sdx@inhouseir.com
Tel: +44 (0) 7881 650 813 / +44 (0) 20 3239 1669
About SDX
For further information, please see the Company's website at
www.sdxenergygroup.com
(https://url.avanan.click/v2/___http:/www.sdxenergygroup.com/___.YXAxZTpzaG9yZWNhcDphOm86MDEzNTAyODI2ZTNhZWY5ZWM4YWU4MGY3MmNiNjhiMDc6Njo4MDY2OmIyZDJhNDdjNTNhNWU3Yjc5Y2VjZDQ5MzgxZTRkZWJlNTE2NjQyYTMwOTk0NmQwOGZjN2U4MWIyMzIxODExNjM6cDpU)
or the Company's filed documents at www.sedar.com
(https://url.avanan.click/v2/___http:/www.sedar.com/___.YXAxZTpzaG9yZWNhcDphOm86MDEzNTAyODI2ZTNhZWY5ZWM4YWU4MGY3MmNiNjhiMDc6NjplNWE4OjE1YTQ5NzZmMjEyMWQ5MjgyZjhkZjI1YmQzNmU3YzE3ODdlMWMyY2MwM2E4YjBiYTJmY2M3ODk2ZWE5MmI3YTM6cDpU)
.
Glossary
"bbl" stock tank barrel of oil
"boe" barrels of oil equivalent
"boe/d" barrels of oil equivalent per day
"CO(2)e" carbon dioxide equivalent
"MMscf" million standard cubic feet
"MMscf/d" million standard cubic feet per day
Forward-looking information
Certain statements contained in this press release may constitute
"forward-looking information" as such term is used in applicable Canadian
securities laws. Any statements that express or involve discussions with
respect to predictions, expectations, beliefs, plans, projections, objectives,
assumptions or future events or are not statements of historical fact should
be viewed as forward-looking information. In particular, statements regarding:
liquidity and sources of cash flows, future drilling developments, costs and
results; future raising of external capital and management's beliefs with
respect to the Company's overall economic position should all be regarded as
forward-looking information.
The forward-looking information contained in this document is based on certain
assumptions, and although management considers these assumptions to be
reasonable based on information currently available to them, undue reliance
should not be placed on the forward-looking information because SDX can give
no assurances that they may prove to be correct. This includes, but is not
limited to, assumptions related to, among other things, commodity prices and
interest and foreign exchange rates; planned synergies, capital efficiencies
and cost-savings; applicable tax laws; future production rates; receipt of
necessary permits; the sufficiency of budgeted capital expenditures in
carrying out planned activities, and the availability and cost of labour and
services.
All timing given in this announcement, unless stated otherwise, is indicative,
and while the Company endeavours to provide accurate timing to the market, it
cautions that, due to the nature of its operations and reliance on third
parties, this is subject to change, often at little or no notice. If there is
a delay or change to any of the timings indicated in this announcement, the
Company shall update the market without delay.
Forward-looking information is subject to certain risks and uncertainties
(both general and specific) that could cause actual events or outcomes to
differ materially from those anticipated or implied by such forward-looking
statements. Such risks and other factors include, but are not limited to,
political, social, and other risks inherent in daily operations for the
Company, risks associated with the industries in which the Company operates,
such as: operational risks; delays or changes in plans with respect to growth
projects or capital expenditures; costs and expenses; health, safety and
environmental risks; commodity price, interest rate and exchange rate
fluctuations; environmental risks; competition; permitting risks; the ability
to access sufficient capital from internal and external sources; and changes
in legislation, including but not limited to tax laws and environmental
regulations. Readers are cautioned that the foregoing list of risk factors is
not exhaustive and are advised to refer to the Principal Risks &
Uncertainties section of SDX's Annual Report for the year ended 31 December
2023, which can be found on SDX's website and its SEDAR profile
at www.sedar.com
(https://url.avanan.click/v2/___http:/www.sedar.com/___.YXAxZTpzaG9yZWNhcDphOm86NTdhMTkwODdmZDQwZjFjZjYyYjA3ZmVjNDllNzdmMGI6NjozNGQxOjM1M2UzZGZiNzQwMWNiODRlMDA2ZDkwYzYxYjc3YjM5MDg5ODY5NmRlNDY3MzgwZGRlZWU5ODlmMDRhYjM5MmI6cDpUOk4)
, for a description of additional risks and uncertainties associated with
SDX's business.
The forward-looking information contained in this press release is as of the
date hereof and SDX does not undertake any obligation to update publicly or to
revise any of the included forward‐looking information, except as required
by applicable law. The forward‐looking information contained herein is
expressly qualified by this cautionary statement.
Non-IFRS Measures
This news release contains the terms "Netback," and "EBITDAX" which are not
recognised measures under IFRS and may not be comparable to similar measures
presented by other issuers. The Company uses these measures to help evaluate
its performance.
Netback is a non-IFRS measure that represents sales net of all operating
expenses and government royalties. Management believes that Netback is a
useful supplemental measure to analyse operating performance and provide an
indication of the results generated by the Company's principal business
activities prior to the consideration of other income and expenses. Management
considers Netback an important measure as it demonstrates the Company's
profitability relative to current commodity prices. Netback may not be
comparable to similar measures used by other companies.
EBITDAX is a non-IFRS measure that represents earnings before interest, tax,
depreciation, amortisation, exploration expense and impairment. EBITDAX is
calculated by taking operating income/(loss) and adjusting for the add-back of
depreciation and amortisation, exploration expense and impairment of property,
plant, and equipment (if applicable). EBITDAX is presented in order for the
users to understand the cash profitability of the Company, which excludes the
impact of costs attributable to exploration activity, which tend to be one-off
in nature, and the non-cash costs relating to depreciation, amortization and
impairments. EBITDAX may not be comparable to similar measures used by other
companies.
Oil and Gas Advisory
Certain disclosures in this news release constitute "anticipated results" for
the purposes of National Instrument 51-101 - Standards of Disclosure for Oil
and Gas Activities ("NI 51-101") of the Canadian Securities Administrators
because the disclosure in question may, in the opinion of a reasonable person,
indicate the potential value or quantities of resources in respect of the
Company's resources or a portion of its resources. Without limitation, the
anticipated results disclosed in this news release include estimates of
volume, flow rate, production rates, porosity, and pay thickness attributable
to the resources of the Company. Such estimates have been prepared by Company
management and have not been prepared or reviewed by an independent qualified
reserves evaluator or auditor. Anticipated results are subject to certain
risks and uncertainties, including those described above and various
geological, technical, operational, engineering, commercial, and technical
risks. In addition, the geotechnical analysis and engineering to be conducted
in respect of such resources is not complete. Such risks and uncertainties may
cause the anticipated results disclosed herein to be inaccurate. Actual
results may vary, perhaps materially.
Use of the term "boe" or the term "MMscf" may be misleading, particularly if
used in isolation. A "boe" conversion ratio of 6 Mcf: 1 bbl and a "Mcf"
conversion ratio of 1 bbl: 6 Mcf are based on an energy equivalency conversion
method primarily applicable at the burner tip and does not represent a value
equivalency at the wellhead.
Use of a Standard
Reserve and resource estimates disclosed or referenced herein have been
prepared in accordance with the SPE's Canadian Oil and Gas Evaluation Handbook
and in accordance with NI 51-101.
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rns@lseg.com (mailto:rns@lseg.com)
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