SDX Earnings up as Output Beats Plan
North African gas focused upstream minnow SDX reported May 20 a boost in pre-tax and exploration expense earnings in Q1 2020 relative to the year before. Output was higher than expected, the gas price up, and so far the impact of Covid-19 has been "minimal."
It reported a loss of $3.2mn, down from a gain of $0.1mn last year, but said most of its capital expenditure for this year had already been spent. The netback though is down from $27.84/barrel of oil equivalent (boe) to $16.47/boe.
CEO Mark Reid described the period as "positive" given the "challenging global economic environment," and expects the company to produce significant returns in 2020 and to continue to grow thereafter.
Production was above expectations and exploration drilling added new resources in both Morocco and Egypt. About 90% of its cash flow for this year is expected to be generated from its fixed-price gas business: in Q1 the price was $10,33/'000 ft³, up from last year's $10.25/'000 ft³. In Eygpt it receives $2.85/'000 ft³ from its South Disouq production.
Q1 2020 entitlement production of 8,061 boe/d is 117% higher than Q1 2019 and is at, or exceeding, 2020 guidance. South Disouq performed ahead of expectations: gross production of 51.4mn ft³/d of dry gas and 511 barrels/d of condensate equating to 4,994 barrels of oil equivalent/d net to SDX.
Its first Sidouq well drilled this year was a duster but the second, SD-12X, spud on 18 March and announced as a commercial discovery in the Kafr el Sheikh formation, has 24bn ft³ estimated recoverable resources. Plans are underway to connect SD-12X to the gas processing plant through a 5.8-km flow line to the Ibn Yunus-1X well location.
Management is looking to high grade other adjacent, and now de-risked, prospects for drilling in the next two to three years, it said.
In Morocco SDX has made seven discoveries from nine wells, with the tenth well, LMS-2, completed and awaiting crew mobilisation for testing. All objectives of the drilling campaign were achieved with 10 wells with the final two wells deferred to preserve capital.
This year's production guidance is between 6,750 boe/d and 7,000 boe/d, which is 66-72% higher than 2019 actual production. Capital expenditure guidance has been revised up from $24.7mn to about $28.2mn, following the cost of tying in the successful SD-12X well in South Disouq.