The acquisition of Circle Oil assets, strong oil prices and cost discipline drove up group operational netbacks from US$22.5/boe in H117 to US$32.9/boe in H118, with the group generating net cash from operations of US$20.3m. Funds from operations helped SDX Energy Inc (LON:SDX) to support an active H118 drilling programme while maintaining a strong balance sheet position, ending the half-year with US$25.2m of cash and an undrawn credit facility of US$10m. As highlighted in our recent research note, Looking ahead at 2019 work programme, SDX remains on track to double production in 2018, while investing in an active E&A programme and development drilling in both Egypt and Morocco. Our valuation remains broadly unchanged at 92.7p/share (from 92.5p/share) as we include a slightly higher capex estimate for delivery of first gas at South Disouq.
Upcoming catalysts
2019 drilling will focus on Ibn Yunus lookalikes in Egypt, with combined unrisked recoverable volumes of c.201.5bcf and 34bcf in the Abu Madi structural trap. In addition, an upcoming bid round in Egypt could provide SDX with an option to extend its acreage position to include further Kafr el Sheik targets. SDX is also looking to test oil potential at South Disouq through the four-way drip, 50mmbo unrisked Young prospect in 2019. In Morocco, SDX has an 87% appraisal/development well success rate based on calibrated 3D seismic and is looking to leverage this success targeting 20bcf of gross unrisked resource in 2019.
To read the entire report Please click on the pdf File Below: