SDX Energy Inc (LON:SDX) has announced the completion of the ONZ-7 well on the Sebou permit in Morocco (SDX 75%) with the well delivering an average flow rate of 10mmscfd and maximum flow of 15.3mmscfd, the highest flow rate to date from the four successful wells drilled and in the basin historically. ONZ-7 provides confidence in gas deliverability and the resource base as SDX expands its customer base in Kenitra. Edison recently published a detailed update on our view of Moroccan gas sales and group valuation, which stands at core NAV of 58.3p/share and RENAV of 65.6p/share.
SDX’s 2017/18 Moroccan well campaign has an 80% exploration success rate to date with 100% success on all prospects drilled on high resolution 3D seismic. The remainder of the company’s drilling campaign targets slightly higher risk prospectivity, with follow-on potential across the Sebou Centre and Lalla Mimouna exploration permits in a success case. Basin wide unrisked prospective resources stand at c 50bcf providing adequate resource potential on which to base future drilling campaigns.
As discussed in some detail in our last published update, we estimate that SDX will need to add 11.9bcf of gas beyond the current nine-well drilling campaign in order to support risked market demand. This would require a further 10 to 11 wells to be drilled over the next 12-24 months. We do not include this incremental value in our NAV at this point in time, with value expected to be unlocked as drilling is committed and gas contracts signed.
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