In this note, we revisit SDX Energy's (V:SDX) 2017/2018 gas discoveries in Morocco and Egypt and look ahead at the company’s plans to leverage this success to deepen its resource base. In 2019, drilling in Egypt will focus on several Ibn Yunus lookalikes with combined unrisked recoverable volume of c 70bcf and a 17bcf Abu Madi structural trap. In addition, SDX will target a 50mmbo unrisked oil prospect in 2019. In Morocco, SDX has a commendable 87% success rate of discovering gas at Sebou based on calibrated 3D seismic; 2019 targets include 20bcf of gross unrisked resource adding gas-behind-pipe in order to meet anticipated demand growth. Our updated valuation includes planned exploration, appraisal and development activity for 2019 and higher short-term oil price expectations, with valuation rising from 65.6p/share to 92.5p/share (+41%).
Leveraging Egypt and Morocco drilling success
Planned 3D seismic shoots in both Egypt and Morocco aim to leverage recent exploration success and mature an inventory of low-risk, drill-ready gas exploration/appraisal prospects that can be promptly monetised. Planned 2019 wells target 87bcf of unrisked gas resource (70bcf Kefr El Sheik and 17bcf Abu Madi prospects), a 50mmbo unrisked oil prospect at South Disouq and 20bcf in Morocco. Low well costs and historical success rates imply high risked IRRs, in particular for Sebou where success rates on calibrated 3D seismic exceed 87%, well costs are c $2m and unit net-backs surpass $10/mcf.
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