REG - SDX Energy PLC - INTERIM RESULTS
29/09/2023 07:00
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RNS Number : 0871O SDX Energy PLC 29 September 2023
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.
29 September 2023
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2023
SDX Energy plc ("SDX" or the "Company") announces its unaudited financial and
operating results for the six months ended 30 June 2023. All monetary values
are expressed in United States dollars net to the Company unless otherwise
stated.
H1 2023 Highlights
· Net Production, 3,291 boe/d (459 bbls/d and 17.0 mmscf/d)
· Out of three wells completed across SDX's portfolio in the year to
date, two were put on production during H1 2023.
· Carbon intensity of 4.5kg CO2e/boe at operated assets during H1 2023.
· Gross Profit / Netback of $10.1 million, EBITDAX of $8.1 million and
operating cash flow (before capex) of $0.9 million.
· Capex $2.9 million.
The first half of 2023 saw a number of strategic and operational initiatives.
The key senior management hires, the securing of additional funding,
improvements in commercial terms in Morocco and progress in selling our
Egyptian assets has brought a new focus and clearly defined strategy to the
Group. We enter the last part of 2023, and head into 2024, well placed to
deliver long-term sustainable returns to shareholders.
In May 2023, we announced our new Executive team with the appointment of
Daniel Gould as Managing Director, William McAvock as CFO and Lesley Maclean
as Head of Corporate Development. The new team brings a wealth of experience
of the sector and will be focused on delivering on growth initiatives that
will create long-term sustainable value.
The first half of 2023 was in many ways a period of revitalising the SDX
story. With a new strategy that is based on developing a hybrid energy
producer, the Company announced that it is selling its Egyptian assets and I
am pleased to say that the process remains firmly on track and the disposal,
if completed, would constitute a fundamental change of business pursuant to
AIM Rule 15, because the consideration, as currently calculated in the Heads
of Terms, will significantly exceed the market cap Consideration Test
threshold. The disposal will allow the Company to address some of the legacy
issues inherited from the past and allow the Company to develop its organic
and inorganic growth story in Morocco and beyond.
Finance
During the first half of 2023, the Company negotiated a syndicated convertible
loan agreement for up to $3.25 million, which was signed after the end of the
six months period, in July 2023. To date, $2.5 million has been drawn for the
purposes of reducing outstanding debt to the European Bank for Reconstruction
and Development (EBRD), the Moroccan drilling campaign and for general
corporate purposes.
Subsequent to the period end, in September 2023, the Company entered into a
non-binding heads of terms with DIKA MOROCCO AFRICA, its largest offtaker and
a 100%-owned subsidiary of Citic Dicastal, which is a subsidiary of Citic
Group, a Chinese holding company with a corporate portfolio approaching $1
trillion, to prepay for SDX's gas deliveries in Morocco. The initial terms of
the agreement envisage the receipt of approximately $2 million by the end of
September 2023. These funds are planned to be used towards the drilling costs
of the KSR-21 well and for general corporate purposes. A further heads of
terms for a larger prepayment amount is currently under negotiation and is
expected to be agreed and funds drawn by early 2024. The Company plans to
direct this second prepayment towards funding a further multi-well
back-to-back drilling programme. This type of back-to-back drilling, which
allows development of gas behind pipe (booked reserves), further increases
operational efficiency, reduces costs and ensures that immediate and future
demand can be met.
Operations
In February 2022, the Company sold 33% of the shares in Sea Dragon Energy
(Nile) B.V., the entity that holds its interests in the South Disouq
concession, to Energy Flow Global Limited ("EFGL") for a consideration of $5.5
million. From 1 February 2022, the Company owned 67% of Sea Dragon Energy
(Nile) B.V. with the remaining 33% held by EFGL as a non-controlling interest.
In February 2023, the Company and EFGL, at the request of EGAS, entered into
agreement with EFGL to repurchase the 33% of the shares in Sea Dragon Energy
(Nile) B.V. and signed a Deed of Assignment to assign 33% of its 55% interest
(18.15% interest) in the South Disouq concession to EFGL. The consideration
agreed represented 33% of the working capital of Sea Dragon Energy (Nile) B.V.
as at February 2023. From February 2023, the Company owned 100% of Sea Dragon
Energy (Nile) B.V., which owned a 36.85% interest in the South Disouq
concession.
In South Disouq, Egypt, we undertook workover operations on SD-3X and SD-4X
wells, recompleting the wells to shallower reservoirs to maximise recovery and
on IY-2 to restart production.
In West Gharib, Eqypt, we continued with our workover operations on the
existing wells to maximise recovery from this field.
Subsequent to the end of the period, in August 2023, we announced the signing
of the heads of terms for the disposal of all the Company's Egyptian assets to
a large multinational operator with existing Egyptian upstream interests. This
strategic decision allows the Company to focus on the optimisation of its
Moroccan portfolio, including the diversification into the transition energy
sector.
In Morocco, we produced approximately 0.4 billion cubic feet (69,249 barrels
of oil equivalent) during H1 2023. Gas and energy demand in general in the
region remains high and, in June 2023, we renegotiated the gas sales agreement
with one of our key customers and received a higher gas price for production
with effect from 1 May 2023.
In September 2023, we commenced drilling the Ksiri-21 ("KSR-21") well in Sebou
Central of the Gharb Basin, Morocco. The KSR-21 well has reached its total
vertical depth of 1,955 metres (1,966 metres measured depth) targeting a
prospect within the Hoot formation, which is one of the main producing
formations in the area. Drilling and wireline logging data confirm the
presence of gas charged sands within the targeted reservoir section. The
reservoir interval will now be perforated to undergo a short testing period
before being brought onto production to supply existing gas offtakers.
We thank all our stakeholders and shareholders for their support over the last
period, as we work tirelessly to revitalise the business and deliver long-term
sustainable value to shareholders. We would also like to express our
condolences to all those affected by the devastating earthquake in Morocco
earlier this month and continue to offer our support.
Jay Bhattacherjee
Interim Executive Chairman
28 September 2023
Review of operations H1 2023
EGYPT South Disouq
South Disouq is a 115km(2) concession located 65km 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
41km(2).
In February 2022, the Company sold 33% of the shares in Sea Dragon Energy
(Nile) B.V. to Energy Flow Global Limited ("EFGL") for a consideration of
US$5.5 million. From 1 February 2022, the Company owned 67% of Sea Dragon
Energy (Nile) B.V. with the remaining 33% held by EFGL as a non-controlling
interest ("NCI").
On 22 February 2023, at the request of EGAS, the Company and EFGL entered into
agreement with EFGL to repurchase the 33% of the shares in Sea Dragon Energy
(Nile) B.V. in exchange for deferred consideration of $1.6 million plus an
assignment of 33% of the Company's 55% interest (equivalent to a direct 18.15%
interest), with a fair value of $5.5 million, in the South Disouq concession
to EFGL. From 22 February 2023, the Company owned 100% of Sea Dragon Energy
(Nile) B.V. and a 36.85% interest in the South Disouq concession.
As a result, SDX has a 36.85% working interest in the South Disouq and Ibn
Yunus development leases and a 67.0% working interest in the Ibn Yunus North
development lease. Its partner, EFGL, has a 18.15% working interest in the
South Disouq and Ibn Yunus development leases and a 33.0% working interest in
the Ibn Yunus North development lease; and its partner, IPR, holds a 45%
interest in the South Disouq and Ibn Yunus development leases.
H1 2023 Activity
Throughout H1 2023, planned field management operations were carried out and
the Central Processing Facility showed excellent performance with a 99%
uptime.
The SD-12X well is currently shut-in, as this well shares a flow-line with the
SD-12_East well and the higher pressure is backing-out SD-12X. Once the
pressure equilibrates, SD-12X will be brought back on-line.
SD-1X continues to be produced intermittently since July 2022. IY-2X was
worked-over with a sand bond, with the aim of reducing sand production.
Unfortunately, the sand bond did not prevent sand production during the
testing phase and the well has been shut-in pending further investigation.
Following the 2022 drilling campaign, SDX continues to work on updating plans
for future drilling and identifying remaining targets in the acreage. The
Mohsen discovery is currently under evaluation, to determine future
development options and work has been ongoing to finalise a field development
plan.
Production operations at the asset ended up in the expected range during the
six months to 30 June 2023, resulting in gross production of 36.32 MMscfe/d
for the year (2,558boe/d net to SDX).
H2 2023 Outlook
The primary work in H2 2023 will be around finalising the Mohsen discovery's
field development plan. Workovers of SD-4X and SD-3X are planned, with the
wells being recompleted to shallower reservoirs as the main reservoir becomes
fully depleted, and further work will be carried out to identify alternative
solutions for a recompletion at IY-2X.
EGYPT West Gharib
West Gharib is 22 km(2) in area and is currently 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 has 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 General
Petroleum Company ("GPC"), which is a state oil company, 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 through
2022 and into 2023.
H1 2023 Activity
Much of the activity in the West Gharib concession during H1 2023 was centred
around the aforementioned infill drilling campaign: Rabul-9ST was drilled in
January 2023 and the last infill well Rabul-8, was drilled in May 2023.
Additionally, fourteen workovers were carried out across the concession in H1
2023.
For H1 2023, West Gharib average gross sales production stood at approximately
1,834 bbl/d (351 bbl/d net to SDX).
H2 2023 Outlook
It is still planned to workover the Rabul Deep-1 well to convert it to a
water-injector for the Rabul Field. With the completion of the infill drilling
campaign the partnership will review the results of all the drilling and
consider additional development wells.
Workovers of the existing wells is planned to continue throughout 2023 to
maximise production and recovery from the Meseda and Rabul Fields.
MOROCCO
The Company's Moroccan acreage (where SDX has a 75% working interest and is
operator) consists of four exploration permits. All SDX's permits are in the
Gharb Basin in northern Morocco: Sebou Central, Gharb Occidental, Lalla
Mimouna Sud, and Moulay Bouchta Ouest.
The Sebou Central permit is a 132 km(2) exploration permit with several
exploitation concessions contained within it. The exploitation concessions
granted under the Sebou Onshore Petroleum Agreement are Sidi Al Harati SW,
which expires in September 2023, Sidi Al harati W, which expires in October
2024, and Ksiri Central, which expires in January 2025.
The Gharb Occidental concession is an 806 km(2) exploration permit with
numerous prospects and leads already identified on the existing 3D seismic,
which covers the southern part of the permit. The exploitation concessions
granted under the Gharb Occidental Petroleum Agreement are Oulad Youssef
Central, which expires in March 2024, and Guaddari Sud-Ouest and Sidi Al
Harati Sud which both expire in December 2024.
The Company has held the Lalla Mimouna Sud permit since February 2019. This
permit has a duration of eight years, with a commitment to drill one
exploration well and acquire 50 km(2) of 3D seismic within the first
two-and-a-half-year period, which has been met, and started on 14 March 2019.
In September 2021, according to the regulations governing Petroleum
Agreements, SDX relinquished 25% of the original Lalla Mimouna Sud acreage and
entered into the extension period of 2.5 years. The Lalla Mimouna Sud
concession is now a 629.9 km(2) permit.
The Company was awarded the Moulay Bouchta Ouest exploration concession in
February 2019 for a period of eight years. The commitment to reprocess 150 km
of 2D seismic data, acquire 100 km(2) of new 3D seismic, and drill one
exploration well within the first three-and-a-half-year period, started on 14
March 2019. A one year force majeure extension to the permit was granted by
the Ministry of Energy, which expires in September 2023. The concession is in
process to be relinquished.
H1 2023 Activity
During H1 2023 production has been carefully managed to ensure supply to
existing customers. The two compressors SDX operates in Morocco have also been
actively managed maximising recovery from existing wells.
Morocco net production averaged 2.30 MMscf/d for H1 2023.
H2 2023 Outlook
The Company commenced drilling KSR-21 well on 2 September 2023 and reached
its total vertical depth of 1,955 metres (1,966 metres measured depth) on
26 September 2023. The well will be completed as a producer and brought
onstream to produce gas as soon as possible. This well forms the start of a
wider drilling campaign of wells, some of which will target low-risk prospects
and some will target new areas and play levels, expanding the development
footprint. All the wells will be shallow targets charged with biogenic gas.
Gas from these wells will supply the existing customers and an additional
factory that has been constructed by one of those existing customers.
H1 2023 ESG METRICS
· The Company's operated assets recorded a carbon intensity of 4.5kg
CO2e/boe in H1 2023.
· Scope 1 greenhouse gas emissions from all operated assets were 5,400
tons of CO2e. Scope 3 greenhouse gas emissions in Morocco were 30,100 tons of
CO2e, which is approximately 13,800 tons of CO2e less than using alternative
heavy fuel oil.
· There were no Lost Time Injuries at any of the Company's assets
during H1 2023.
· 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.
· The Company continues to adopt high standards of Governance through
its adherence to the QCA Code on Corporate Governance.
Financial Review
Operational and Financial Highlights
In accordance with industry practice, production volumes and revenues are
reported on a Company interest basis, before the deduction of royalties.
Six months ended 30 June
$'000s 2023 2022
West Gharib production service fee revenues 3,467 5,672
South Disouq gas sales revenue ((1)) 8,789 11,032
Royalties (2,963) (3,717)
Net South Disouq gas revenue 5,826 7,315
Morocco gas sales revenue 4,901 7,517
Royalties (51) (146)
Net Morocco gas sales revenue 4,850 7,371
Net other products revenue 1,110 1,975
Total net revenue ((4)) 15,253 22,333
Direct operating expense (5,127) (4,392)
Netback: West Gharib 1,816 4,148
Netback: South Disouq gas ((2)) 3,519 5,400
Netback: Morocco gas 3,681 6,418
Netback: Other products ((2)) 1,110 1,975
Netback (pre-tax) ((3) (4)) 10,126 17,941
EBITDAX ((3) (4)) 8,120 15,274
West Gharib production service fee (bbl/d) 351 376
South Disouq gas sales (boe/d) ((5)) 2,818 3,534
Morocco gas sales (boe/d) 383 638
Other products sales (boe/d) ((5)) 124 179
Total sales volumes (boe/d) ((5)) 3,676 4,727
West Gharib production service fees (bbls) 63,523 67,968
South Disouq gas sales (boe) ((5)) 510,017 639,713
Morocco gas sales (boe) 69,249 115,398
Other products sales (boe) ((5)) 22,405 32,400
Total sales volumes (boe) ((5)) 665,194 855,479
Brent oil price (US$/bbl) $79.78 $107.50
West Gharib oil price (US$/bbl) $64.33 $98.64
Realised West Gharib service fee (US$/bbl) $54.58 $83.45
Realised Morocco gas price (US$/mcf) $11.80 $10.86
Royalties (US$/boe) ((4)) $5.34 $5.86
Operating costs (US$/boe) ((4)) $7.71 $5.13
Netback (US$/boe) ((4)) $15.22 $20.97
Capital expenditures 2,870 12,173
1) South Disouq gas is sold to the Egyptian State at a fixed
price of $2.65MMbtu, which equates to approximately $2.85/Mcf.
2) When calculating Netback for South Disouq gas and other
products (condensate), all South Disouq operating costs are allocated to gas,
as associated products have assumed nil incremental operating costs.
3) Netback and EBITDAX are non-IFRS measures and are defined on
page 7.
4) In February 2022, the Company sold 33% of the shares in Sea
Dragon Energy (Nile) B.V. to Energy Flow Global Limited ("EFGL") for a
consideration of US$5.5 million. From 1 February 2022, the Company owned 67%
of Sea Dragon Energy (Nile) B.V. with the remaining 33% held by EFGL as a
non-controlling interest ("NCI"). On 22 February 2023, at the request of EGAS,
the Company and EFGL entered into agreement with EFGL to repurchase the 33% of
the shares in Sea Dragon Energy (Nile) B.V. in exchange for deferred
consideration of $1.6 million plus an assignment of 33% of the Company's 55%
interest (equivalent to a direct 18.15% interest), with a fair value of $5.5
million, in the South Disouq concession to EFGL. From 22 February 2023, the
Company owned 100% of Sea Dragon Energy (Nile) B.V. and a 36.85% interest in
the South Disouq concession. Before that date the Company consolidated the
results of its subsidiary in the Company's condensed consolidated financial
statements.
5) Sales volumes from the South Disouq concession have been
presented gross of minority interest to the date of the reconstitution (22
February 2023). The share of volumes assigned to the Company's minority
interest holder equals 69,500 boe (384 boe/d) and therefore the Company's
share of South Disouq volumes (incl. other products) equals 462,923 boe (2,558
boe/d). Net of minority interest total sales volumes are 595,694 boe (3,291
boe/d).
West Gharib production service fee revenues
The Company recorded service fee revenue relating to the oil production from
the Meseda and Rabul areas of Block H that is delivered to General Petroleum
Company, which is a state oil company ("GPC"). The Company is entitled to a
service fee of between 19.00% and 19.25% of the delivered volumes and has a
50% working/paying interest. The service fee revenue is based on the current
market price of West Gharib crude oil, adjusted for a quality
differential.
Production service fee pricing
For the six months ended 30 June 2023, the Company received an average service
fee per barrel of oil of $54.58, compared to the average West Gharib oil
prices for the periods of $64.33, representing a quality discount of $9.75
(15%) per barrel. For the six months ended 30 June 2022, the Company received
an average service fee per barrel of oil of $83.45, compared to the average
West Gharib oil prices for the periods of $98.64, representing a quality
discount of $15.19 (15%) per barrel.
Production service fee variance from prior year
For the six months ended 30 June 2023 (compared to the six months ended 30
June 2022), the decrease in production service fee revenue by $2.2 million
(39%) from $5.7 million to $3.5 million was driven by a decrease in price of
$1.8 million (32%) and a decrease in production of $0.4 million (7%). The
lower production is owing to natural field decline and an increase in water
cut across several wells partly offset by the contribution of well workover
results and seven wells that came into production during H1 2023 as part of
the ongoing development drilling campaign.
$'000s
Year ended 30 June 2022 5,672
Price variance (1,834)
Production variance (371)
Year ended 30 June 2023 3,467
South Disouq gas sales revenue
The Company sells gas production from the South Disouq concession to the
Egyptian Natural Gas Holding Company ("EGAS"), which is an Egyptian
state-owned holding company, at a fixed price of $2.65/MMbtu, approximately
$2.85/Mcf. The Government of Egypt's entitlement share of gross production
from the asset equates to approximately 51%.
South Disouq gas sales variance from prior year
For the six months ended 30 June 2023 (compared to six months ended 30 June
2022), the decrease in South Disouq gas sales revenue of $2.2 million (20%) is
the result of a decrease in sales volumes of 716boe/d.
The decrease in sales volumes is due to assigning 33% of the Company's
interest in South Disouq to EFGL during the six months period and increased
water and sand production due to natural field decline.
On 22 February 2023, the Company assigned a direct 18.15% interest (33% of the
Company's previous 55% interest) in the South Disouq concession to EFGL by way
of a Deed of Assignment.
There was no scheduled or unscheduled downtime at the Central Processing
Facility ("CPF") during the year ended 30 June 2023.
Morocco gas sales revenue
The Company currently sells natural gas to three industrial customers in
Kenitra, northern Morocco. The Company decided not to immediately renew a
customer contract that expired on 1 April 2023 until the Company has better
visibility on future gas supply and pricing to support the full term of a new
contract.
Morocco gas sales variance from prior year
For the six months ended 30 June 2023 (compared to six months ended 30 June
2022), the decrease in Morocco gas sales revenue of $2.6 million (35%) is
driven by a $3.0 million decrease in production due to limited gas reserve,
partially offset by $0.4 million increase due to selling gas at higher prices.
$'000s
Year ended 30 June 2022 7,517
Price variance 390
Production variance (3,006)
Year ended 30 June 2023 4,901
Royalties
Royalties in Egypt fluctuate from quarter to quarter because of changes in
production and the impact of commodity prices on the amount of cost oil or gas
allocated to the contractors. In turn, there is an impact on the amount of
profit oil or gas from which royalties are calculated.
In Morocco, sales-based royalties become payable when certain
inception-to-date production thresholds are reached, according to the terms of
each exploitation concession.
Direct operating costs
Direct operating costs for the six months ended 30 June 2023 were $5.1
million, compared to $4.4 million for the comparative period of the prior
year.
The direct operating costs per concession were:
Six months ended 30 June
$'000s 2023 2022
West Gharib 1,651 1,524
South Disouq 2,307 1,915
Morocco 1,169 953
Total direct operating expense 5,127 4,392
The direct operating costs per unit per concession were:
Six months ended 30 June
$/boe 2023 2022
West Gharib 25.99 22.42
South Disouq 4.33 2.85
Morocco 16.88 8.26
Total direct operating costs per boe 7.71 5.13
West Gharib
Direct operating costs per barrel ("bbl") for the six months ended 30 June
2023 for West Gharib were higher at $25.99/bbl, compared to $22.42 in the
comparative period of the prior year, due to lower production and higher costs
of increased water cut across several wells.
South Disouq
Direct operating costs per boe for the six months ended 30 June 2023 for South
Disouq were higher at $4.33/boe compared to $2.85/boe in the comparative
period of the prior year. This increase of $0.4 million resulted from the
review and correction of the Company's share in operational expenditures
associated with the IY-N field.
Morocco
Operational expenditure in Morocco is less dependent on production volume, as
certain expenditure is fixed in nature, e.g. headcount and
compressor/separator rentals, might be impacted by expenditure that is one-off
in nature.
Direct operating costs for the six months ended 30 June 2023 were $0.2 million
(23%) higher compared with the comparative period of the prior year as a
result of additional operating expenditure, including adding security guards
for the wells. This higher incurred expenditure, together with the reduction
in production, caused the direct operating costs per boe to increase by 104%
to $16.88/boe.
General and administrative expenses
Six months ended 30 June
$'000s 2023 2022
Wages and employee costs 2,311 2,482
Consultants - inc. PR/IR 158 190
Legal fees 103 173
Audit, tax and accounting services 289 338
Public company fees 349 279
Travel 122 84
Office expenses 247 315
IT expenses 82 167
Service recharges (1,157) (1,986)
Ongoing general and administrative expenses 2,504 2,042
Transaction costs 55 765
Total net G&A 2,559 2,807
Ongoing general and administrative ("G&A") costs for the six months ended
30 June 2023 were $2.5 million which is $0.5 million higher compared to the
same period of the prior year due to a lower recharge of G&A to
operational and capital expenditure partially offset by a reduction in
employee-related expenditure, primarily due to reversal of the 2021 bonus
previously accrued for the UK team, and natural attrition.
Capital expenditures
The following table shows the capital expenditure for the Company. It agrees
with notes 7 and 8 to the consolidated condensed financial statements for the
six months ended 30 June 2023, which include discussion therein.
Six months ended 30 June
$'000s 2023 2022
Property, plant and equipment expenditures ("PP&E") 505 5,169
Exploration and evaluation expenditures ("E&E") 2,358 6,971
Office furniture and fixtures 7 33
Total capital expenditures 2,870 12,173
The Company has future capital commitments associated with its oil and gas
assets, details of which can be found in note 18 to the consolidated condensed
financial statements.
Exploration and evaluation expense
For the six months ended 30 June 2023, exploration and evaluation expenses
stood at $0.4 million, compared to $0.5 million in the same period of the
prior year.
The current period expense relates mainly to:
· a write off of $0.3 million for an unsuccessful exploration well
drilled in Rabul area in West Gharib; and
· new business evaluation activities of $0.1 million
The prior period expense of $0.5 million relates to new business evaluation
activities.
Depletion, depreciation and amortisation
For the six months ended 30 June 2023, depletion, depreciation, and
amortisation ("DD&A") amounted to $6.3 million, compared to $10.4 million
in the same period of the prior year, a reduction of $4.1 million.
Six months ended 30 June
$'000s 2023 2022
West Gharib 782 726
South Disouq 2,785 4,492
Morocco 2,409 4,912
Right of use assets 269 225
Other 15 11
Total DD&A 6,260 10,366
The DD&A movement by concession is primarily the result of the following:
· The DD&A for South Disouq was $2.8 million for the six months
ended 30 June 2023, a decrease of $1.7 million from the same period of the
prior year due to a significant reduction in asset base following the sale of
33% of the Company's interest in South Disouq to EFGL and reducing the net
book value of the asset by $5.1 million;
· The decrease of $2.5 million in DD&A for Morocco for the six
months ended 30 June 2023 compared to the same period of the prior year is due
to significant reduction in asset since H1 2022 following 2022 production and
the $4.8 million impairment charge recorded in Q4 2022; and
· The DD&A for right-of-use assets was $0.3 million and related to
the recognition of leases under IFRS 16. Please refer to note 17 in the
consolidated condensed financial statements.
Foreign exchange loss
In March 2022, Egypt devalued its currency, the Egyptian pound ("EGP"), in
response to macroeconomic circumstances driven by Russia's invasion of
Ukraine. Shortly after this devaluation, the EGP dropped to c.18.2 to the US
dollar, after having traded at c.15.7 EGP to the US dollar since November
2020. In the six months ended 30 June 2023, Egypt further devalued its
currency with the EGP dropping to 30.75 to the US dollar. The mechanism for
collecting receivables in Egypt is not impacted by this devaluation as
receivables are settled in US dollars, or the EGP equivalent, on the date
payment is made. Costs of the Egyptian operations denominated in EGP are not
impacted by the currency devaluation. The $1.3 million foreign exchange loss
for the six months ended 30 June 2023 is mainly the result of the impact on
the EGP cash balance ($0.9 million).
Sources and uses of cash
The Company's net cash position as at 30 June 2023 was $3.0 million,
with cash balances of $6.7 million offset by $3.5 million debt and $0.2
million accrued interest from the EBRD debt facility. The restriction on
exchanging EGP into US dollars is ongoing and the Company is currently unable
to expatriate any cash currently available in Egypt.
The following table sets out the Company's sources and uses of cash for the
six months ended 30 June 2023 and 2022:
Six months ended 30 June
$'000s 2023 2022
Sources
Operating cash flow before working capital movements 5,746 12,298
Borrowings - 2,500
Net proceeds from sale of assets - 5,500
Finance income 56 -
Dividends received 0 311
Total sources 5,802 20,609
Uses
Changes in non-cash working capital (4,187) (1,095)
Property, plant and equipment expenditures (255) (6,175)
Exploration and evaluation expenditures (1,391) (5,369)
Payments of lease liabilities (278) (261)
Finance costs paid - (17)
Income taxes paid (644) (841)
Loan repayments (2,200) -
Effect of foreign exchange on cash and cash equivalents (738) (2,141)
Total uses (9,693) (15,899)
(Decrease)/increase in cash and cash equivalents (3,891) 4,710
Cash and cash equivalents at beginning of period 10,613 10,562
Cash and cash equivalents at end of period 6,722 15,272
Going Concern
The Directors have reviewed the cash flow projections prepared by management
for the period ending 31 December 2024 and believe that there exists a
material uncertainty that may cast significant doubt over the ability of the
Group to continue as a going concern. As a result of various geopolitical
factors, US dollar transfers by the Central Bank of Egypt have been restricted
and the Company is currently unable to expatriate any funds currently in Egypt
and there can be no guarantee of timing on when funds will become available.
These factors have also impacted the Egyptian pound which has been devalued
several times since March 2022 and is currently trading at less than half of
its value compared with the USD since that date. Whilst the company's
receivables are not impacted by this devaluation, the company's cash balance
in country is fully exposed to any additional currency fluctuations. In
addition, the Board believes it has options to raise external capital, the
Board however cannot guarantee the final quantum and timings of any proposed
financing. The Board would also note that there are no guarantees that
arrangements 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 Condensed Consolidated financial
statements. Accordingly, the Condensed 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 Company uses these measures to help
evaluate its performance. Please see note 16 to the Condensed Consolidated
Financial Statements for a reconciliation of these non-IFRS measures to IFRS.
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 Company's principal business
activities prior to the consideration of other income and expenses. Management
considers netback an important measure because it demonstrates the Company'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 Company, 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
Interim Executive Chairman
28 September2023
Condensed Consolidated Balance Sheet (unaudited)
As at 30 June 2023
($'000s) Note As at As at
30 June 2023 31 December 2022
Assets
Cash and cash equivalents 5 6,722 10,613
Trade and other receivables 5 19,811 18,549
Inventory 6 8,244 7,988
Current assets 34,777 37,150
Investments 3,529 3,390
Property, plant and equipment 7 14,584 25,205
Exploration and evaluation assets 8 13,627 11,618
Right-of-use assets 17 1,135 1,147
Non-current assets 32,875 41,360
Total assets 67,652 78,510
Liabilities
Trade and other payables 9 24,280 22,787
Current income taxes 11 403 854
Borrowings 5 3,714 5,658
Lease liability 17 529 441
Current liabilities 28,926 29,740
Decommissioning liability 10 5,886 6,349
Deferred income taxes 290 290
Lease liability 17 660 723
Non-current liabilities 6,836 7,362
Total liabilities 35,762 37,102
Equity
Share capital 2,601 2,601
Share premium 130 130
Share-based payment reserve 6,895 7,174
Accumulated other comprehensive loss (917) (917)
Merger reserve 37,034 37,034
(Accumulated loss)/retained earnings (13,853) (10,872)
Non-controlling interest 19 - 6,258
Total equity 31,890 41,408
Equity and liabilities 67,652 78,510
The notes are an integral part of these Condensed Consolidated Financial
Statements.
The financial statements on pages 10 to 25 were approved by the board of
directors on 28 September 2023 and signed on its behalf by:
Jay
Bhattacherjee
Timothy Linacre
Interim Executive Chairman
Non-Executive Director
Condensed Consolidated Statement of Comprehensive Income (unaudited)
For the six months ended 30 June 2023
Six months ended 30 June
($'000s) Notes 2023 2022
Revenue, net of royalties 13 15,253 22,333
Direct operating expense (5,127) (4,392)
Gross profit 10,126 17,941
Exploration and evaluation expense 8 (437) (534)
Depletion, depreciation and amortisation 7,17 (6,260) (10,366)
Share-based compensation 12 (72) (122)
Share of profit from joint venture 268 262
Gain on part disposal of asset 7 357 -
- Ongoing general and administrative expenses 14 (2,504) (2,042)
- Transaction costs 14 (55) (765)
Operating loss 1,423 4,374
Finance costs (472) (188)
Foreign exchange loss 20 (1,348) (2,238)
Loss before income taxes (397) 1,948
Current income tax expense 11 (2,093) (3,151)
Loss and total comprehensive loss for the period (2,490) (1,203)
Attributable to
SDX shareholders - (761)
Non-controlling interests 19 - (442)
Net loss, attributable to SDX shareholders, per share
Basic 15 $(0.012) $(0.004)
Diluted 15 $(0.012) $(0.004)
The notes are an integral part of these Condensed Consolidated Financial
Statements.
Condensed Consolidated Statement of Changes in Equity (unaudited)
For the six months ended 30 June 2023
Six months ended 30 June
($'000s) Note 2023 2022
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 7,174 7,536
Share-based compensation for the period 12 72 122
Share-based options terminated 12 (351) -
Balance, end of period 6,895 7,658
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 (10,872) 26,270
Part repurchase / disposal of subsidiary (842) (2,736)
Share-based options terminated 12 351 -
Total comprehensive loss (2,490) (761)
Balance, end of period (13,853) 22,773
Non-controlling interest
Balance, beginning of period 6,258 -
Part (repurchase) / disposal of subsidiary 19 (6,258) 8,236
Loss for the period 19 - (442)
Balance, end of period 0 7,794
Total equity 31,890 77,073
The notes are an integral part of these Condensed Consolidated Financial
Statements.
Condensed Consolidated Statement of Cash Flows (unaudited)
For the six months ended 30 June 2023
Six months ended 30 June
($'000s) Note 2023 2022
Cash flows generated from/(used in) operating activities
(Loss)/gain before income taxes (397) 1,948
Adjustments for:
Depletion, depreciation and amortisation 7,17 6,260 10,366
Exploration and evaluation expense 8 351 -
Finance expense 472 188
Share-based compensation charge 12 72 122
Foreign exchange loss 20 1,348 2,238
Tax paid by state 11 (1,735) (2,302)
Gain on asset part disposal 7 (357) -
Share of profit from joint venture (268) (262)
Operating cash flow before working capital movements 5,746 12,298
(Increase)/decrease in trade and other receivables 5 (1,133) 2,090
Decrease in trade and other payables 9 (2,066) (2,053)
Payments for inventory 6 (325) (1,097)
Payments for decommissioning (663) (35)
Cash generated from operating activities 1,559 11,203
Income taxes paid 11 (644) (841)
Net cash generated from operating activities 915 10,362
Cash flows generated from/(used in) investing activities:
Property, plant and equipment expenditures 8 (255) (6,175)
Exploration and evaluation expenditures 7 (1,391) (5,369)
Proceeds on part disposal of subsidiary - 5,500
Dividends received 0 311
Net cash used in investing activities (1,646) (5,733)
Cash flows generated from/(used in) financing activities:
(Repayments)/net proceeds from loans and borrowings 5 (2,200) 2,500
Payments of lease liabilities 17 (278) (261)
Finance income/(expense) 56 (17)
Net cash (used in)/ generated from financing activities (2,422) 2,222
(Decrease)/increase in cash and cash equivalents (3,153) 6,851
Effect of foreign exchange on cash and cash equivalents 20 (738) (2,141)
Cash and cash equivalents, beginning of period 10,613 10,562
Cash and cash equivalents, end of period 6,722 15,272
The notes are an integral part of these Condensed Consolidated Financial
Statements.
Notes to the Condensed Consolidated Financial Statements
For the six months ended 30 June 2023
1. Reporting entity
SDX Energy Plc ("SDX" or "the Company") is a public limited company
incorporated and domiciled in England and Wales. The address of the Company's
registered office is 38 Welbeck Street, London, United Kingdom, W1G 8DP. The
Condensed Consolidated Financial Statements of the Company as at and for the
period ended 30 June 2023 and 2022 ("Condensed Consolidated Financial
Statements") comprise the Company and its controlled subsidiaries and include
the Company's share of joint arrangements (together the "Group").
The Company's shares trade on the London Stock Exchange's Alternative
Investment Market ("AIM") in the United Kingdom under the symbol "SDX".
The Company is engaged in the exploration for and development and production
of oil and natural gas. The Company's principal properties are in the Arab
Republic of Egypt and the Kingdom of Morocco.
2. Basis of preparation
a) Statement of compliance
These Condensed Consolidated Financial Statements are unaudited and include
the financial statements of the Company and its subsidiary undertakings. They
have been prepared using accounting bases and policies consistent with those
used in the preparation of the financial statements of the Company and the
Group for the year ended 31 December 2022. These statements do not include all
of the disclosures required for annual financial statements, and accordingly,
should be read in conjunction with the financial statements and other
information set out in the Company's 31 December 2022 Annual Report, which
were prepared in accordance with UK-adopted international accounting
standards, and in compliance with International Financial Reporting Standards
issued by the International Accounting Standards Board (IFRSs as issued by
IASB). The accounting policies are unchanged from those disclosed in the
annual consolidated financial statements.
These Condensed Consolidated Financial Statements of SDX Energy Plc were
approved by the board of directors on 28 September 2023.
b) Functional and presentation currency
The functional currency for each entity in the Group, and for joint
arrangements and associates, is the currency of the primary economic
environment in which that entity operates. Transactions denominated in other
currencies are converted to the functional currency at the exchange rate
ruling at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies are retranslated at period-end exchange
rates.
The Group's financial statements are presented in US dollars, as that
presentation currency most reliably reflects the business performance of the
Group as a whole. On consolidation, income statement items for each entity are
translated from the functional currency into US dollars at average rates of
exchange, where the average is a reasonable approximation of rates prevailing
on the transaction date. Balance sheet items are translated into US dollars at
period-end exchange rates.
c) Use of estimates and judgments
The preparation of financial statements in conformity with IFRS requires
management to make judgments, estimates and assumptions that affect the
application of accounting policies and the reported amounts of assets,
liabilities, income, and expenses. Actual results may differ from these
estimates and affect the results reported in these Condensed Consolidated
Financial Statements. Estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in the year in
which the estimates are revised and in any future years affected.
Purchase price allocations, depletion, depreciation and amortisation, and
amounts used in impairment calculations are based on estimates of crude oil
and natural gas reserves. Reserve estimates are based on engineering data,
estimated future prices, expected future rates of production, and the timing
of future capital expenditures, all of which are subject to many
uncertainties, interpretations, and judgements. The Company expects that, over
time, its reserve estimates will be revised upward or downward, based on
updated information such as the results of future drilling, testing, and
production levels, and may be affected by changes in commodity prices.
In accounting for property, plant, and equipment during the drilling of oil
and gas wells, at period end it is necessary to estimate the value of work
done for any unbilled goods and services provided by contractors.
The invoicing of produced crude oil, natural gas, and natural gas liquids is,
for non-operated concessions, performed by the Company's joint venture
partners. In certain concessions, the operator relies on production and/or
price information from other third parties, which may not be consistently
prepared and received on a timely basis. In such instances, the Company may be
required to estimate production volumes and/or prices based on the most robust
available data.
Provisions recognised for decommissioning costs and related accretion expense,
derivative fair value calculations, fair value of share-based payments
expense, deferred tax provisions, and fair values assigned to any identifiable
assets and liabilities in business combinations are also based on estimates.
By their nature, the estimates are subject to measurement uncertainty and the
impact on the Condensed Consolidated Financial Statements of future periods
could be material.
d) 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
Condensed Consolidated Financial Statements.
The directors reviewed the cash flow projections prepared by management for
the period ending 31 December 2024. The capital expenditure and operating
costs used in these forecasted cash flows are based on the board's best
estimate of the operating budgets for each of its assets and the corporate
general and administrative expenses.
The principal assumptions underlying the cash flow forecast and the
availability of finance to the Group are as follows:
· The sale of the Company's Egypt assets for the amount of
consideration as agreed in the heads of terms signed in August 2023;
· The maintenance of foreign currency exchange rates;
· The Company expects to be able to settle significant expenditure of
$1.6 million incurred in relation two transactions, the takeover by Tenaz
Energy Corp and an acquisition, that were terminated during 2022. Management
has so far been successful in discussing payment plans with several
professional services firms associated with these transactions;
· The KSR-21 well drilled in Morocco during September 2023 will produce
a commercial quantity of gas for several months;
· The Board expects to be able to settle significant capital
expenditure incurred in Morocco, including approximately $6.3 million for the
drilling and connection of five wells during 2021 and 2022, and approximately
$4.0 million for the drilling and connection of one well during September
2023;
· The Company expects to be able to meet its licence commitments in
Morocco and Egypt. This includes drilling wells that will also ensure
continued gas supply to three strategic customers in Morocco. The Company may
need to renegotiate its minimum work programmes or licence commitments with
the Moroccan and Egyptian authorities on licences where the Group has capital
commitments and discretionary expenditures. Based on previous successful
renegotiations of work programmes, the directors believe that this will likely
be achieved, but it is not guaranteed;
· The Company will repay the loan owed to the European Bank for
Reconstruction and Development ("EBRD") in full using the proceeds from the
sale of the Company's Egypt assets; and
· The convertible loan that the Company entered into in July 2023 will
be repaid by conversion into equity shares at maturity in July 2024.
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 successful sale of assets, 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. As a result of
various geopolitical factors, US dollar transfers by the Central Bank of Egypt
have been restricted and the Company is not able to expatriate any funds
currently available in Egypt and there can be no guarantee of timing on when
funds will become available. These factors have also impacted the Egyptian
pound, as disclosed in Note 20, which has been devalued several times since
March 2022 and is currently trading at less than half of its value compared
with the US dollar since that date. Whilst the company's receivables are not
impacted by this devaluation, the company's cash balance in country is fully
exposed to any additional currency fluctuations. In addition, the Board
believes it has options to raise external capital, the Board however cannot
guarantee the final quantum and timings of any proposed financing. The Board
would also note that there are no guarantees that arrangements 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 Condensed Consolidated financial
statements. Accordingly, the Condensed 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.
3. New standards and interpretation not yet adopted
Certain new accounting standards and interpretations have been published that
are not mandatory for 30 June 2023 reporting periods and have not been early
adopted by the Group. None of these are expected to have a material impact on
the Group in the current or future reporting periods and on foreseeable future
transactions.
4. Determination of fair values
Some of the Company's accounting policies and disclosures require the
determination of fair value; for both financial and non-financial assets and
liabilities. Fair values have been determined for measurement and/or
disclosure purposes based on the methods set out below. When applicable,
further information about the assumptions made in determining fair values is
disclosed in the notes specific to that asset or liability.
The different levels of financial instrument valuation methods have been
defined as:
· Level 1 fair value measurements are based on unadjusted quoted market
prices.
· Level 2 fair value measurements are based on valuation models and
techniques where the significant inputs are derived from quoted indices.
· Level 3 fair value measurements are based on unobservable
information.
The carrying value of cash and cash equivalents, trade and other receivables,
trade and other payables, and loans and borrowings included in the Condensed
Consolidated balance sheet approximate to their fair value because of the
short-term nature of those instruments. The fair value of employee stock
options is measured using Black-Scholes (non-market-based performance
conditions) and Monte Carlo (market-based performance conditions) option
pricing models. Measurement inputs include the share price on the measurement
date, exercise price of the instrument, expected volatility based on the
weighted average historic volatility (adjusted for changes expected as the
result of publicly available information), the weighted average expected life
of the instruments based on historical experience and general option holder
behaviour, expected dividends, anticipated achievement of performance
conditions, and the risk-free interest rate.
5. Financial risk management
a) Credit risk
Credit risk is the risk of financial loss to the Company if a customer,
partner, or counterparty to a financial instrument fails to meet its
contractual obligations and arises principally from the Company's receivables
from joint venture partners, oil and natural gas customers, and cash held with
banks. The maximum exposure to credit risk at the end of the period is as
follows:
Carrying amount
$'000s 30 June 2023 31 December 2022
Cash and bank balances 5,185 9,145
Restricted cash((1)) 1,537 1,468
Cash and cash equivalents 6,722 10,613
Trade and other receivables ((2)) 18,986 17,855
Total 25,708 28,468
1) Cash collateral of US$1.5 million (2022: US$1.5 million)
which is held at the bank to cover bank guarantees for minimum work
commitments on the Company's Moroccan concessions. These guarantees are
subject to forfeiture in certain circumstances if the Company does not fulfil
its minimum work obligations.
2) Excludes prepayments of US$0.8 million which are included in
the Condensed Consolidated Balance Sheet as trade and other receivables but
which are not categorised as financial assets as summarised above (2022:
US$0.7 million)
Net debt
Carrying amount
$'000s 30 June 2023 31 December 2022
Cash and cash equivalents 6,722 10,613
Borrowings (3,458) (5,500)
Accrued interest on borrowings (256) (158)
Net debt 3,008 4,955
The Company's net debt position as at 30 June 2023 was $3.0 million
(31 December 2022: $4.9 million), with cash balances of $6.7 million
(31 December 2022: $10.6 million) offset by drawn debt of $3.5 million
(31 December 2022: $5.5 million) and accrued interest from the EBRD debt
facility of $0.2 million (31 December 2022: $0.1 million). Subsequent to
the period end, the Company paid $1.0 million on 28 July 2023 and
$0.2 million on 12 September 2023 to EBRD, reducing the principal from
$3.5 million to $2.3 million.
Trade and other receivables
All the Company's operations are conducted in Egypt and Morocco. The Company's
exposure to credit risk is influenced mainly by the individual characteristics
of each counter party.
The Company applies the IFRS 9 simplified model for measuring the expected
credit losses, which uses a lifetime expected loss allowance and are measured
on the days past due criterion. Having reviewed past payments, combined with
the credit profile of its existing trade debtors, to assess the potential for
impairment, the Company has concluded that this is insignificant because there
has been no history of default or disputes arising on invoiced amounts since
inception. As a result, the credit loss percentage is assumed to be almost
zero. No provision for doubtful accounts against these sales has been recorded
as at 30 June 2023 (31 December 2022: no provision).
The maximum exposure to credit risk for loans and receivables at the reporting
date by type of customer was:
Carrying amount
$'000s 30 June 2023 31 December 2022
Government of Egypt-controlled corporations 9,816 8,448
Government of Morocco-controlled corporations 5,147 5,371
Third-party gas customers 1,804 2,468
Joint venture partners 969 247
Other ((1)) 1,250 1,321
Total 18,986 17,855
1) Excludes prepayments of US$0.8 million which are included in
the Condensed Consolidated Balance Sheet as trade and other receivables but
which are not categorised as financial assets as summarised above (2022:
US$0.7 million)
$9.8 million (31 December 2022: $8.4 million) of current receivables
relates to gas, condensate sales and production service fees that are due from
GPC and EGAS, both of which are Government of Egypt-controlled corporations.
The Company expects to collect outstanding receivables of $7.3 million
(31 December 2022: $4.8 million) for South Disouq, and $2.5 million
(31 December 2022: $3.6 million) for West Gharib in the normal course of
operations.
ONHYM, a Government of Morocco-controlled corporation, owes $5.1 million
(31 December 2022: $5.4 million), which relates to its outstanding share of
well completion and connection costs, and production costs. The Company has
collected $0.2 million from ONHYM during H1 2023, all of which relates to work
performed in the period before the Company acquired the Moroccan assets. The
$5.1 million receivable balance as at 30 June 2023 (31 December 2022: $5.4
million) includes $1.9 million (31 December 2022: $1.9 million) accrued
receivable for ONHYM's share of historic well completion and connection costs.
Of the $5.1 million (31 December 2022: $5.4 million), $3.2 million
(31 December 2022: $3.6 million) is dated older than one year. To date, the
Company has not suffered cash losses for validly issued and accepted invoices
and management has determined that no further risk provision is required. A
payable of $5.0 million (31 December 2022: $4.8 million) to ONHYM is also
held on the Condensed Consolidated Balance Sheet.
Third-party gas customers in Morocco, owes $1.8 million (31 December 2022:
$2.5 million) and is expected to be collected within agreed credit terms.
Subsequent to 30 June 2023, the Company collected $5.6 million of trade
receivables from those outstanding at 30 June 2023; $3.1 million from EGAS,
$0.7 million from GPC and $1.8 million from third-party gas customers in
Morocco.
Joint venture partners comprise partner current accounts of $1.0 million
(31 December 2022: $0.2 million) from Energy Flow Global Limited.
The other receivables of $1.3 million (31 December 2022: $1.3 million)
consist of $1.1 million (31 December 2022: $1.1 million) for Goods and
Services Tax ("GST")/Value Added Tax ("VAT") In London and Morocco and $0.2
million (31 December 2022: $0.2 million) for deposits.
$0.8 million (31 December 2022: $0.7 million) related to prepayments,
predominantly associated with South Disouq Central Processing Facility ("CPF")
spare parts and G&A expenditure, is recorded in the Condensed Consolidated
Balance Sheet.
As at 30 June 2023 and 31 December 2022, the Company's trade and other
receivables, other than prepayments, are aged as follows:
Carrying amount
$'000s 30 June 2023 31 December 2022
Current (less than 90 days) 9,048 9,884
Past due (more than 90 days) 9,938 7,971
Total 18,986 17,855
Current trade and other receivables are unsecured and non-interest-bearing.
The balances that are past due are not considered impaired.
6. Inventory
During the six months ended 30 June 2023, the inventory balance increased by
$0.2 million from $8.0 million as at 31 December 2022 to $8.2 million as at
30 June 2023 due to additions of materials to be used in drilling campaigns in
Morocco amounting to $0.5 million and spare parts to be used in the South
Disouq CPF amounting to $0.1 million, which was partially offset by $0.1
million inventory consumed in the Morocco to tie in DOB-1 well, and $0.3
million of inventory consumed in South Disouq.
7. Property, plant and equipment
$'000s Oil and gas properties Other assets Total
Cost:
Balance at 1 January 2022 191,405 1,813 193,218
Additions 7,445 67 7,512
Transfer from exploration and evaluation assets 6,774 6,774
-
Balance at 31 December 2022 205,624 1,880 207,504
Additions 505 512
7
Asset part disposal (5,143) (5,143)
-
Balance at 30 June 2023 200,986 1,887 202,873
Accumulated depletion, depreciation, amortisation and impairment:
Balance at 1 January 2022 (157,446) (1,179) (158,625)
Depletion, depreciation and amortisation for the period (18,820) (44) (18,864)
Impairment expense (4,810) (4,810)
-
Balance at 31 December 2022 (181,076) (1,223) (182,299)
Depletion, depreciation and amortisation for the period (5,975) (15) (5,990)
Balance at 30 June 2023 (187,051) (1,238) (188,289)
NBV Property, plant and equipment as at 31 December 2022 24,548 657 25,205
NBV Property, plant and equipment as at 30 June 2023 13,935 649 14,584
During the six months ended 30 June 2023, additions of $0.5 million were
predominantly related to costs incurred for ongoing drilling campaign at West
Gharib ($0.8 million), various infrastructure works in Morocco ($0.2 million)
and various capital expenditure in South Disouq development project ($0.2
million). This is partially offset by reducing the decommissioning provision
due to South Disouq asset part disposal ($0.7 million).
In February 2022, the Company sold 33% of the shares in Sea Dragon Energy
(Nile) B.V. to Energy Flow Global Limited ("EFGL") for a consideration of
US$5.5 million. From 1 February 2022, the Company owned 67% of Sea Dragon
Energy (Nile) B.V. with the remaining 33% held by EFGL as a non-controlling
interest ("NCI").
On 22 February 2023, at the request of EGAS, the Company and EFGL entered into
agreement with EFGL to repurchase the 33% of the shares in Sea Dragon Energy
(Nile) B.V. in exchange for deferred consideration of $1.6 million plus an
assignment of 33% of the Company's 55% interest (equivalent to a direct 18.15%
interest), with a fair value of $5.5 million, in the South Disouq concession
to EFGL. From 22 February 2023, the Company owned 100% of Sea Dragon Energy
(Nile) B.V. and a 36.85% interest in the South Disouq concession. The net book
value of the assets sold was $5.1 million, resulting in a $0.4 million gain
recognised in the Condensed Consolidated Statement of Comprehensive Income.
Depletion, depreciation and amortisation as disclosed per the Condensed
Consolidated Statement of Comprehensive Income also include a charge of $0.3
million relating to the right-of-use assets.
The difference between the $0.5 million addition disclosed above and the $0.3
million cash outflow from property, plant, and equipment expenditure in the
Condensed Consolidated Statement of Cash Flows is the result of normal timing
differences of recognising additions on an accruals basis and the timing of
the actual payment of capital expenditure creditors.
8. Exploration and evaluation assets
$'000s
Balance at 1 January 2022 21,611
Additions 20,062
Transfer to property, plant and equipment (6,774)
Exploration and evaluation expense (23,281)
Balance at 31 December 2022 11,618
Additions 2,358
Exploration and evaluation expense (349)
Balance at 30 June 2023 13,627
During the six months ended 30 June 2023, E&E additions totalled $2.4
million:
· $1.6 million of E&E additions in Morocco relates to tie in costs
for DOB-1 ($0.7 million), BMK-1 testing and tie in costs ($0.6 million), and
pre-drilling expenditures ($0.3 million) for Morocco planned drilling campaign
in H2 2023;
· $0.4 million discovery bonus has been incurred in South Disouq for
Mohsen development concession; and
· $0.4 million of E&E additions in West Gharib to drill Rabul SE-1.
For the six months ended 30 June 2023, exploration and evaluation expenses in
the Condensed Consolidated Statement of Comprehensive Income stood at $0.4
million. This relates mainly to:
· a write off of $0.3 million for an unsuccessful exploration well
drilled in Rabul area in West Gharib; and
· new business evaluation activities of $0.1 million
The difference between the $2.4 million disclosed above and the $1.4 million
cash outflow from exploration and evaluation expenditure in the Condensed
Consolidated Statement of Cash Flows is the result of normal timing
differences of recognising additions on an accruals basis and the timing of
the actual payment of capital expenditure creditors.
9. Trade and other payables
$'000s 30 June 2023 31 December 2022
Trade payables 12,784 13,257
Accruals 2,487 2,335
Joint venture partners 6,508 6,375
Deferred consideration 1,600 -
Other payables 901 820
Total trade and other payables 24,280 22,787
Trade payables comprise billed services and goods. As at 30 June 2023, they
consisted predominantly of royalties payable to the Moroccan government, the
Morocco 2022 drilling campaign and G&A creditors, including transaction
costs. The $0.5 million decrease in trade payables as at 30 June 2023 from 31
December 2022 is mainly the result of payment of costs associated with 2022
Moroccan drilling campaign.
Accruals include amounts for products and services received that have yet to
be invoiced. The increase of $0.2 million from 31 December 2022 primarily
reflects the value of work undertaken but not yet billed as at 30 June 2023
for DOB-1 and BMK-1 in Morocco ($0.9 million) partially offset by the reversal
of the 2021 bonus that had been accrued for London team ($0.4 million) and
invoices received for the value of work undertaken that had not yet been
billed as at 31 December 2022 ($0.3 million).
Joint venture partners comprise partners current accounts of $1.5 million in
Egypt (2022: $1.6 million), $5.0 million from ONHYM for the Morocco
concessions (2022: $4.8 million). The joint venture partner current accounts
represent the net of monthly cash calls paid less billings received.
In February 2022, the Company sold 33% of the shares in Sea Dragon Energy
(Nile) B.V. to Energy Flow Global Limited ("EFGL") for a consideration of
US$5.5 million. From 1 February 2022, the Company owned 67% of Sea Dragon
Energy (Nile) B.V. with the remaining 33% held by EFGL as a non-controlling
interest ("NCI").
On 22 February 2023, at the request of EGAS, the Company and EFGL entered into
agreement with EFGL to repurchase the 33% of the shares in Sea Dragon Energy
(Nile) B.V. in exchange for deferred consideration of $1.6 million plus an
assignment of 33% of the Company's 55% interest (equivalent to a direct 18.15%
interest), with a fair value of $5.5 million, in the South Disouq concession
to EFGL. From 22 February 2023, the Company owned 100% of Sea Dragon Energy
(Nile) B.V. and a 36.85% interest in the South Disouq concession.
Other payables of $0.9 million (2022: $0.8 million) comprise of withholding
tax payable from the Moroccan drilling and other sundry creditors.
The difference between the $1.5 million increase in trade and other payables
in the Condensed Consolidated Balance Sheets as at 30 June 2023 and 31
December 2022 and the line item in the Condensed Consolidated Statement of
Cash Flows pertaining to the decrease in trade and other payables of $2.1
million, is due to the fact that trade and other payables in the Condensed
Consolidated Balance Sheets include capital expenditure items and the movement
in the Condensed Consolidated Statement of Cash Flows relates only to the
movement in operational expenditure and G&A creditors.
10. Decommissioning liability
As at 30 June 2023, the total future undiscounted cash flows relating to the
decommissioning of Moroccan assets amounted to $4.8 million, to be incurred up
to 2025, and the liability was discounted using a nominal risk-free rate of
4%.
As at 30 June 2023, the total future undiscounted cash flows relating to the
decommissioning of the South Disouq assets amounted to $1.7 million (SDX's
share), to be incurred in 2024, and the liability was discounted using a
nominal risk-free rate of 11%.
No decommissioning liability is recorded for the Company's West Gharib asset
under the terms of the concession agreement.
The discounted value of the cash flows above amounts to $5.9 million as at 30
June 2023 and is shown below:
$'000s 30 June 2023 31 December 2022
Decommissioning liability, beginning of period 6,349 5,769
Recognition of provision 844
-
Reduce provision due to asset part disposal ((1)) (663) -
Changes in estimate (448)
-
Utilisation of provision (66)
-
Accretion 200 250
Decommissioning liability, end of period 5,886 6,349
Of which:
Current -
-
Non-current 5,886 6,549
((1)) The provision reduction is due to assigning 18.15% of the Company
interest in the South Disouq concession to EFGL.
No decommissioning activities are anticipated to take place over the next 12
months and as at 30 June 2023 the entire liability is classed as non-current.
11. Income tax
According to the terms of the Company's Egyptian Production Sharing Contracts
("PSCs"), the corporate tax liability of the joint venture partners is paid by
the government-controlled corporations ("Corporations") that participate in
these PSCs, out of the profit oil and gas attributable to the Corporations,
and not by the Company. For accounting purposes however, the corporate taxes
paid by the Corporations are treated as a benefit earned by the Company, with
the amount being "grossed up" and included in net oil and gas revenues and the
income tax expense of the Company.
The Company also has a Production Services Agreement ("PSA") related to West
Gharib, with the legal title held by SDX Energy Egypt (Meseda) Ltd ("SDX West
Gharib"), an Egyptian incorporated entity. The Company is governed by the laws
and tax regulations of the Arab Republic of Egypt and pays corporate taxes
annually on the adjusted profit of SDX West Gharib.
The current income tax expense in the Condensed Consolidated Statement of
Comprehensive Income for the six months ended 30 June 2023 mainly relates to
income tax on the South Disouq PSC ($1.7 million), the Company's PSA in West
Gharib ($0.3 million) and a social contribution tax in Morocco for the 2023
fiscal period ($0.1 million). The current income tax liability of $0.4 million
in the Condensed Consolidated Balance Sheet relates to the Company's PSA in
West Gharib.
The Company's Moroccan operations benefit from a 10-year corporation tax
holiday from first production, by concession. From 1 January 2022, profits
generated from the Ksiri concession are expected to be subject to corporation
tax from 2022. However, the Ksiri concision is expected to generate a tax loss
in 2023 due to the cost of KSR-20 well, which was drilled in 2022 and its
taxable depreciation will be charged over three years as per the tax
regulations in Morocco. The concession will only be required to settle its
minimum contribution tax which is due even in the absence of profit and is
calculated to be less than $0.1 million. During the six months ended 30 June
2023, the Company has accounted for a charge less than $0.1 million relating
to a social contribution tax levied, on an annual discretionary basis by the
Moroccan government, for the 2023 fiscal period. The levied rate, on taxable
profits, varies between 1.5% and 3.5% on an annual basis. In accordance with
the requirements of IAS 12 "Income taxes" this charge has been classified as a
corporate income tax in the Condensed Consolidated Statement of Comprehensive
Income.
12. Share-based compensation
During the six months ended 30 June 2023, the Company recognised a total
expense of $0.1 million (2022: $0.1 million) in the Condensed Consolidated
Statement of Comprehensive Income relating to the amortisation of the fair
value of options granted in earlier periods over the vesting period. No
options for ordinary shares in the Company were issued, nor vested during the
six months ended 30 June 2023. An amount of $0.4 million was released from the
share options reserve to retained earnings on the cancellation of options
granted in earlier periods.
13. Revenue, net of royalties
Six months ended 30 June
$'000s 2023 2022
West Gharib production service fee revenues 3,467 5,672
South Disouq gas sales revenue 8,789 11,032
Royalties (2,963) (3,717)
Net South Disouq gas revenue 5,826 7,315
Morocco gas sales revenue 4,901 7,517
Royalties (51) (146)
Net Morocco gas sales revenue 4,850 7,371
Net other products revenue 1,110 1,975
Total net revenue before tax 15,253 22,333
The production service fees relate to West Gharib, which is governed by an
Egyptian PSA.
The Company sells gas production from the South Disouq concession to the
Egyptian national gas company, EGAS, at a fixed price of $2.65/ MMbtu
(approximately $2.85/Mcf). The royalties are those attributable to the
government, taken in accordance with the fiscal terms of the PSC. The net
other products revenue relates to condensate sales from this concession.
The Moroccan gas sales revenue is derived from a Petroleum Agreement with the
Moroccan state. Sales-based royalties become payable when certain
inception-to-date production thresholds are reached, according to the terms of
each exploitation concession. Royalty payments are made directly to the
Government of Morocco.
14. General and administrative expenses
Six months ended 30 June
$'000s 2023 2022
Wages and employee costs 2,311 2,482
Consultants - inc. PR/IR 158 190
Legal fees 103 173
Audit, tax and accounting services 289 338
Public company fees 349 279
Travel 122 84
Office expenses 247 315
IT expenses 82 167
Service recharges (1,157) (1,986)
Ongoing general and administrative expenses 2,504 2,042
Transaction costs 55 765
Total net G&A 2,559 2,807
15. Loss per share
Six months ended 30 June
$'000s 2023 2022
Loss and total comprehensive loss for the period (2,490) (761)
Weighted average amount of shares
- Basic 204,563 205,242
- Diluted 204,999 205,685
Per share amount
- Basic $(0.012) $(0.004)
- Diluted $(0.012) $(0.004)
Basic loss per share is calculated by dividing the loss attributable to
shareholders of the Company by the weighted average number of ordinary shares
in issue during the period. Diluted per share information is calculated by
adjusting the weighted average number of ordinary shares outstanding to assume
conversion of all dilutive potential ordinary shares. No such dilution took
place during the six month ended 30 June 2023.
16. Segmental reporting
The Company's operations are managed on a geographic basis, by country. The
Company is engaged in one business of upstream oil and gas exploration and
production. The Executive Directors are the Company's chief operating decision
maker within the meaning of IFRS 8.
Six months ended 30 June 2023 Six months ended 30 June 2022
Egypt Morocco Unallocated ((1)) Total Egypt Morocco Unallocated ((1)) Total
$'000s
Revenue 10,403 4,850 - 15,253 14,962 7,371 - 22,333
Direct operating expense (3,958) (1,169) - (5,127) (3,439) (953) - (4,392)
Netback (pre tax) ((2)) 6,445 3,681 - 10,126 11,523 6,418 - 17,941
General and administrative expenses (436) (687) (1,436) (2,559) (171) (705) (1,931) (2,807)
Stock-based compensation - - (72) (72) - - (122) (122)
Share of profit from joint venture 268 - - 268 262 - - 262
Gain on sale of asset 357 - - 357 - - - -
EBITDAX ((2)) 6,634 2,994 (1,508) 8,120 11,614 5,713 (2,053) 15,274
Exploration and evaluation expense (365) - (72) (437) - (76) (458) (534)
Depletion, depreciation and amortisation (3,616) (2,533) (111) (6,260) (5,256) (4,992) (118) (10,366)
Impairment expense - - - - - - - -
Bad debt expense - - - -
Operating income/(loss) 2,653 461 (1,691) 1,423 6,358 645 (2,629) 4,374
1) Unallocated expenditure, assets and liabilities include
amounts of a corporate nature and not specifically attributable to a
geographical segment.
2) Netback and EBITDAX are not recognised measures under IFRS. The
Company uses these measures to help evaluate its performance. Please refer to
the firnancial review for the definition of these alternative performance
measures.
The segment assets and liabilities as at 30 June 2023 and 31 December 2022 are
as follows:
30 June 2023 31 December 2022
Egypt Morocco Unallocated ((1)) Total Egypt Morocco Unallocated ((1)) Total
$'000s
Segment assets 30,844 30,558 6,250 67,652 38,058 31,811 8,641 78,510
Segment liabilities (5,843) (24,367) (5,552) (35,762) (6,885) (26,131) (4,086) (37,102)
1) Unallocated expenditure, assets and liabilities include
amounts of a corporate nature and not specifically attributable to a
geographical segment.
17. Leases
The Group has entered into various fixed-term leases, mainly for properties
and vehicles. During the six months ended 30 June 2023 the Group has renewed
the office lease contract in Morocco.
a) Amounts recognised in the balance sheet
The analysis of the lease liability as at 30 June 2023 is as follows:
$000s 30 June 2023 31 December 2022
Current
529 441
Non-current
660 723
Total lease liabilities 1,189 1,164
The right-of-use assets as at 30 June 2023 amounted to $1.1 million:
$000s 30 June 2023 31 December 2022
Properties 1,039 1,010
Motor vehicles
96 137
Total 1,135 1,147
b) Amounts recognised in the statement of profit or loss
The depreciation charge for the six months ended 30 June 2023 amounted to $0.3
million and is shown below by underlying class of asset:
$000s Depreciation charge Six months ended 30 June 2023 Depreciation charge Six months ended 30 June 2022
Properties
227 189
Motor vehicles
42 6
Total
269 195
18. Commitments and contingencies
Pursuant to the concession and production service fee agreements in Egypt and
Morocco, the Company is required to perform certain minimum exploration and
development activities that include the drilling of exploration and
development wells. These obligations have not been provided for in the
Condensed Consolidated Financial Statements.
In Morocco, across the four exploration permits SDX holds, the commitments are
for eight exploration wells, the acquisition of a total of 150km2 of 3D
seismic and the reprocessing of 150km of 2D seismic specifically related to
the Moulay Bouchta permit. All commitments should be completed by September
2025 and the total estimated cost of these commitments is $20.6 million. Local
management is currently in discussion to reallocate commitments between
concessions.
In South Disouq, the commitments are to drill two exploration wells, with an
assigned financial commitment of $5.0 million (gross). After the HA-1X and
MA-1X drilling cost incurred, the remaining unmet commitment is $1.1 million
(gross).
The Group operates in several countries and, accordingly, it is subject to the
various tax and legal regimes in the countries in which it operates. From time
to time, the Group is subject to a review of its related tax filings and in
connection with such reviews, disputes can arise with the tax authorities over
the interpretation or application of certain rules to the Group's business
conducted within the country involved. If the Group is unable to resolve any
of these matters favourably, there may be an adverse impact on the Group's
financial performance, cash flows or results of operations. This may also be
the case for any legal claims that the Group is required to defend. In the
event that management's estimate of the future resolution of these matters
changes, the Group will recognise the effects of the changes in its Condensed
Consolidated financial statements in the period that such changes occur.
The Group has been awarded a 10-year extension to its West Gharib Production
Services Agreement in Egypt until 9 November 2031. The key remaining
commitments related to this extension, in which SDX has a 50% working
interest, are as follows:
• A commitment to drill three more development
wells, or one development well and one exploration well, the second option of
which has been completed during H1 2023;
• The final price-driven bonus of $0.5 million (SDX
share $0.3m) which was settled in Q1 2023; and
• The final payment of a deferred signature bonus of
$0.3 million will be settled on 31 December 2023.
19. Interests in subsidiaries
In February 2022, the Company sold 33% of the shares in Sea Dragon Energy
(Nile) B.V. to Energy Flow Global Limited ("EFGL") for a consideration of
US$5.5 million. From 1 February 2022, the Company owned 67% of Sea Dragon
Energy (Nile) B.V. with the remaining 33% held by EFGL as a non-controlling
interest ("NCI").
On 22 February 2023, at the request of EGAS, the Company and EFGL entered into
agreement with EFGL to repurchase the 33% of the shares in Sea Dragon Energy
(Nile) B.V. in exchange for deferred consideration of $1.6 million plus an
assignment of 33% of the Company's 55% interest (equivalent to a direct 18.15%
interest), with a fair value of $5.5 million, in the South Disouq concession
to EFGL. From 22 February 2023, the Company owned 100% of Sea Dragon Energy
(Nile) B.V. and a 36.85% interest in the South Disouq concession.
Summarised balance sheet Sea Dragon Energy (Nile) B.V.
As at 30 June 2023 As at 31 December 2022
Current assets
- 9,941
Current liabilities
- 3,771
Current net assets
- 6,170
Non-current assets
- 15,171
Non-current liabilities
- 2,378
Non-current net assets
- 12,793
Net assets
- 18,963
Accumulated NCI
- 6,258
Summarised statement of comprehensive income Sea Dragon Energy (Nile) B.V.
Six months ended 30 June 2023
Revenue
-
Results for the period
-
Result allocated to NCI
-
Summarised statement of cash flows Sea Dragon Energy (Nile) B.V.
For six months ended 30 June 2023
Cash flows from operating activities
-
Cash flows from investing activities
-
Cash flows from financing activities
-
Change in cash and cash equivalents
-
Effect of foreign exchange on cash and cash equivalents
-
Net impact on cash and cash equivalents
-
20. Foreign exchange loss
In March 2022, Egypt devalued its currency, the Egyptian pound ("EGP"), in
response to macroeconomic circumstances driven by Russia's invasion of
Ukraine. Shortly after this devaluation, the EGP dropped to c.18.2 to the US
dollar, after having traded at c.15.7 EGP to the US dollar since November
2020. During the six months ended 30 June 2023, Egypt further devalued its
currency with the EGP dropping to c.30.75 to the US dollar. The mechanism for
collecting receivables in Egypt is not impacted by this devaluation as
receivables are settled in US dollars, or the EGP equivalent, on the date
payment is made. Costs of the Egyptian operations denominated in EGP are not
impacted by the currency devaluation. The $1.3 million foreign exchange loss
for the six months ended 30 June 2023 (2022: $2.2 million) is mainly the
result of the $0.9 million impact on the EGP cash balance (2022: $1.7
million).
21. Subsequent events
In July 2023, the Company entered into a convertible loan agreement with Aleph
Finance Ltd for up to $3.25 million (the "Convertible Loan") of which an
initial amount of $2 million was drawn on 26 July 2023 and a further amount of
$0.5 million was drawn on 12 September 2023. The Convertible Loan is
unsecured, convertible at any time at the option of the individual lenders and
repayable 364 days after the initial drawdown of the Convertible Loan is made.
The conversion price is approximately 4.5 pence per Ordinary Share (or, if
lower, the lowest issue price for any Ordinary Shares issued during the life
of the Convertible Loan). If conversion occurs within ten business days of
maturity, the conversion price is approximately 6.6 pence per Ordinary Share.
Interest of SOFR+15% on the Convertible Loan will be payable on a quarterly
basis with an option for payment in kind, upon mutual agreement by the
borrower and lenders.
The Company paid $1.0 million on 28 July 2023 and $0.2 million on 12 September
2023 to EBRD, reducing the principal from $3.5 million to $2.3 million.
In August 2023, the Company entered into non-binding heads of terms ("Heads of
Terms") with a large multinational operator to divest of all of its Egyptian
assets. The Company expects to close the transaction by year-end. Completion
of the Disposal will be subject to, among other conditions, the negotiation of
final transaction documentation and obtaining Egyptian government approvals
for the sale. The Heads of Terms are non-binding and, therefore there can be
no certainty that the Disposal will complete.
In September 2023, the Company commenced drilling the Ksiri-21 ("KSR-21") well
in Sebou Central of the Gharb Basin, Morocco.
In September 2023, the Company entered into a non-binding heads of terms with
DIKA MOROCCO AFRICA, its largest offtaker, to prepay for SDX's gas deliveries
in Morocco. The initial terms of the agreement envisage the draw down of
approximately $2 million by the end of September 2023. These funds are
planned to be used towards the drilling costs of the KSR-21 well.
For further information:
SDX Energy Plc
Daniel Gould, Managing Director
William McAvock, Chief Financial Officer
Tel: +44 (0) 20 3219 5640
Shore Capital (Nominated Adviser and Broker)
Toby Gibbs/Iain Sexton
Tel: +44 (0) 20 7408 4090
InHouseIR (Investor and Media Relations)
Sarah Dees/Oliver Clark
Email: sdx@inhouseir.com (mailto:sdx@inhouseir.com)
Tel: +44 (0) 78 8165 0813 / +44 (0) 20 3239 1669
Camarco (PR)
Billy Clegg/Owen Roberts/Violet Wilson
Tel: +44 (0) 20 3757 4980
Competent Persons Statement
In accordance with the AIM Rules for Companies, the technical information
contained in this announcement has been reviewed and approved by Mr. Aaron
LeBlanc, Head of Operations at SDX Energy Plc. Mr. LeBlanc is a qualified
person as defined in the London Stock Exchange's Guidance Note for Mining and
Oil and Gas Companies and has the necessary professional and technical
competencies to conduct and review petroleum operations. Mr. LeBlanc has a
Bachelor of Science Degree in Geology from the University of Calgary and is a
professional member of the AAPG. Mr. LeBlanc has 21 years of oil and gas
industry technical, operational and leadership experience.
About SDX
For further information, please see the Company's website at
www.sdxenergygroup.com
(https://url.avanan.click/v2/___http:/www.sdxenergygroup.com/___.YXAxZTpzaG9yZWNhcDphOm86YTMzMTQ3ZThiMmM3OTM5NTUyYWI0YzFhZmM0MmIyNTg6NjpmMTg1OmIyNzIyOTlmNDlhZTI3Nzc1YTBkMTNmN2I3ZjcyNmM4Y2Q0MWU4ZmE4NTZiYmI5N2RhMDNmYjQwOWJjYWNkOGM6cDpU)
or the Company's filed documents at www.sedar.com
(https://url.avanan.click/v2/___http:/www.sedar.com/___.YXAxZTpzaG9yZWNhcDphOm86YTMzMTQ3ZThiMmM3OTM5NTUyYWI0YzFhZmM0MmIyNTg6NjowMDk4OjQ3NmFiNTM1NjQwZDFmMmViZjNjOWUzNzY5OGJjNDcyZWU0ZDE1NmI5ZDBhYjY4YjE4MDFlNzQ4ZmU5YWVhZDc6cDpU)
.
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
the developments and results at KSR-21 well and potential sale of Egypt assets
should 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
2022, which can be found on SDX's SEDAR profile at www.sedar.com
(https://url.avanan.click/v2/___http:/www.sedar.com/___.YXAxZTpzaG9yZWNhcDphOm86YTMzMTQ3ZThiMmM3OTM5NTUyYWI0YzFhZmM0MmIyNTg6NjowMDk4OjQ3NmFiNTM1NjQwZDFmMmViZjNjOWUzNzY5OGJjNDcyZWU0ZDE1NmI5ZDBhYjY4YjE4MDFlNzQ4ZmU5YWVhZDc6cDpU)
, 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
recognized 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 analyze 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, amortization, exploration expense and impairment. EBITDAX is
calculated by taking operating income/(loss) and adjusted for the add-back of
depreciation and amortization, 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.
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