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.
LONDON, March 23, 2018 /CNW/ - SDX Energy Inc. (TSXV, AIM: SDX), the North Africa focused oil and gas company, is pleased to announce its financial and operating results for the three months and year ended December 31, 2017 (with full year results prepared on an audited basis). The Company's full annual audited financial statements and annual report have been published on the Company website at www.sdxenergy.com and on SEDAR at www.sedar.com. All monetary values are expressed in United States dollars net to the Company unless otherwise stated.
Reserves
Corporate and Financial
Three months ended |
Twelve months ended | |||
US$ million except per unit amounts |
2017 |
2016 |
2017 |
2016 |
Net Revenues |
11.0 |
5.4 |
39.2 |
12.9 |
Netback(2) |
8.5 |
3.6 |
28.9 |
7.6 |
Net realized average oil price/service fees - US$/barrel |
54.39 |
36.60 |
46.70 |
31.51 |
Net realized average Morocco gas price - US$/mcf |
9.72 |
- |
9.51 |
- |
Depletion, depreciation and amortization(3) |
(4.8) |
(0.8) |
(17.8) |
(3.3) |
Non-cash exploration & eval'n write down |
- |
- |
- |
(28.4) |
Non-cash impairment expense |
- |
(4.3) |
- |
(4.3) |
Gain on acquisition |
(4.7) |
- |
29.6 |
- |
Total comprehensive income/(loss) |
(2.6) |
0.1 |
28.3 |
(28.0) |
Net cash generated from operating activities |
15.1 |
(1.7) |
21.6 |
(1.9) |
Cash and cash equivalents |
25.8 |
4.7 |
25.8 |
4.7 |
Note: | |
(1) |
Using a conversion ratio of 5.8 Mcf:1 boe. |
(2) |
Refer to "Non-IFRS Measures" section of this release Below for details of Netback. |
(3) |
Increased DD&A reflects the impact of the acquisition of Circle Oil's producing assets in Egypt and Morocco and the 8" Pipeline in Morocco. |
Operational Highlights
Egypt
Morocco
Permit |
Name |
Result |
Net Pay |
Rate |
Sebou |
KSR-14 |
Conventional |
20.0m |
6.40 MMscf/d |
Sebou |
KSR-15 |
Conventional Natural Gas Discovery |
17.2m |
7.52 MMscf/d |
Sebou |
KSR-16 |
Conventional Natural Gas |
14.2m |
8.43 MMscf/d |
Gharb Centre |
ELQ-1* |
Uncommercial |
2.0m |
Not Tested |
Sebou |
ONZ-7** |
Conventional Natural Gas Discovery |
5.0m |
15.34 MMscf/d |
Sebou |
KSS-2*** |
Dry Hole |
Nil |
Not Tested |
Sebou |
SAH-2**** |
Conventional Natural Gas Discovery |
5.2m |
13.45 MMscf/d |
Well results announced *January 4, **January 15, ***February 21 and ****March 9, 2018
Disclosure clarification
Reference is made to the SDX December 31, 2017 Year End Reserves and Resources Audit Report ("the 2017 Reserves and Resources Audit Report"), prepared and audited in accordance with the COGE Handbook by ERC Equipoise Limited an independent, qualified reserves auditor, which shows that 38.7 bcf of gas and 0.201 million barrels of condensate have been classed as gross 2P Reserves in SDX's South Disouq Concession (SDX 55% Working Interest: 21.3 bcf of gas and 0.111 million barrels of condensate). Reference is also made to the SDX Press Release dated July 5, 2017 whereby, amongst other things, it was announced that SDX's South Disouq Concession had Gross Contingent Resources of 47.1 bcf of gas and 2.2 million barrels of condensate (SDX 55% Working Interest: 25.9 bcf of gas and 1.21 million barrels of condensate).
Notwithstanding that the 2017 Reserves and Resources Audit Report is now re-classifying the originally reported Contingent Resources as 2P Reserves, albeit with a lower recoverable volume, the Press Release of July 5, 2017 should have included some additional disclosure describing possible uncertainties as at that date that may have resulted in the Contingent Resources ultimately not being recovered/classed as 2P reserves. As at July 5, 2017, these uncertainties would have been focused on potential recoverable volumes, gas price, the cost to develop the required infrastructure (evacuation pipeline and gas processing facility) and operating costs. These issues have subsequently been considered and addressed in the 2017 Reserves and Resources Audit Report as part of the process of reclassifying the South Disouq Contingent Resources to 2P Reserves.
Outlook:
Egypt
Morocco (75% Working Interest)
Corporate
Paul Welch, President & CEO of SDX Energy, commented:
"2017 was an exceptional year for SDX, with the acquisition of Circle Oil's assets, enabling us to substantially increase production, and cash flow, over the course of the year.
We continued to see strong operational performance throughout the year across our portfolio. In North West Gemsa we are seeing the results of our twelve successful workovers, and in Meseda we successfully drilled two exploration wells in 2017 followed by the successful Rabul-5 appraisal well earlier this month. The remainder of 2018 will see a second appraisal well, Rabul-4, followed by two development wells on the Meseda area of the concession. Our nine well drilling programme in Morocco has seen five discoveries from seven wells drilled to date and we look forward to continuing this drilling success throughout the rest of 2018.
As a company, we continue to focus on low cost, high margin production, thereby creating further value for our shareholders. Our strong funding position means we are well placed to capitalise on any suitable, value enhancing asset opportunities that may arise going forward."
KEY FINANCIAL & OPERATING HIGHLIGHTS
Audited consolidated financial statements with Management's Discussion and Analysis for the 3 and 12 months ended December 31, 2017 are now available on the Company's website at www.sdxenergy.com and on SEDAR at www.sedar.com.
Prior |
Three months |
Twelve months ended | |||||
$000s except per unit amounts |
2017 |
2016 |
2017 |
2016 | |||
FINANCIAL |
|||||||
Gross Revenues(1) |
13,902 |
13,972 |
8,436 |
52,493 |
18,362 | ||
Royalties |
(3,778) |
(2,968) |
(3,082) |
(13,327) |
(5,448) | ||
Net Revenues |
10,124 |
11,004 |
5,354 |
39,166 |
12,914 | ||
Operating costs |
(2,672) |
(2,526) |
(1,752) |
(10,254) |
(5,282) | ||
Netback |
7,452 |
8,478 |
3,602 |
28,912 |
7,632 | ||
Total comprehensive (loss)/income |
4,408 |
(2,621) |
(2,059) |
28,307 |
(27,963) | ||
Net income/(loss) per share - basic |
0.022 |
(0.010) |
(0.03) |
0.156 |
(0.39) | ||
Cash, end of period |
30,469 |
25,844 |
4,725 |
25,844 |
4,725 | ||
Working capital (excluding cash) |
27,928 |
20,881 |
7,098 |
20,881 |
7,098 | ||
Capital expenditures |
3,423 |
15,302 |
856 |
21,040 |
13,339 | ||
Total assets |
138,898 |
141,057 |
41,617 |
141,057 |
41,617 | ||
Shareholders' equity |
116,981 |
114,619 |
37,264 |
114,619 |
37,264 | ||
Common shares outstanding (000's) |
204,459 |
204,493 |
79,844 |
204,493 |
79,844 | ||
OPERATIONAL |
|||||||
NW Gemsa oil sales (bbl/d) |
1,893 |
1,710 |
468 |
1,733 |
534 | ||
Block-H Meseda production service fee (bbl/d) |
551 |
561 |
679 |
595 |
662 | ||
Morocco gas sales (boe/d) |
611 |
680 |
- |
596 |
- | ||
Other products sales (boe/d)(2) |
384 |
310 |
3,166 |
313 |
796 | ||
Total sales volumes (boe/d) |
3,439 |
3,261 |
4,313 |
3,237 |
1,192 | ||
Realized oil price (US$/bbl) |
48.28 |
57.77 |
44.56 |
50.02 |
38.00 | ||
Realized service fee (US$/bbl) |
36.41 |
44.11 |
31.12 |
37.05 |
26.26 | ||
Realized oil sales price and service fees ($/bbl) |
45.61 |
54.39 |
36.60 |
46.70 |
31.51 | ||
Realized Morocco gas price (US$/mcf) |
9.53 |
9.72 |
- |
9.51 |
- | ||
Royalties ($/bbl) |
11.94 |
9.89 |
6.33 |
11.28 |
7.47 | ||
Operating costs ($/bbl) |
8.44 |
8.42 |
4.41 |
8.68 |
7.25 | ||
Netback ($/bbl) |
23.54 |
28.26 |
9.08 |
24.47 |
10.47 |
Notes: | |
(1) |
Net Revenues for the 3 and 12 months ended 31 December 2016 includes US$2.3 MM relating to gas and natural gas liquids revenue relating to the period October 1, 2013 to December 31, 2016. This revenue had previously not been recognised due to uncertainties relating to entitlement and pricing which have now been resolved. US$1.8 MM relates to the period October 1, 2013 to December 31, 2015 and US$0.5MM relates to the 12 months ended December 31, 2016. |
(2) |
Average daily natural gas and natural gas liquids sales relating to the period October 1, 2013 to December 31, 2016 and recognised in the 3 months to December 31, 2016 equated to 796 and 3,166 barrels of oil equivalent ("BOEP/D") for the 12 and 3 months to December 31, 2016 respectively. Out of the 796 BOEP/D, 130 BOE/D was actually generated in the 12 months to December 31, 2016. |
Consolidated Balance Sheet |
||
(thousands of United States dollars) |
As at December 31, 2017 |
As at December 31, 2016 |
Assets |
||
Cash and cash equivalents |
25,844 |
4,725 |
Trade and other receivables |
37,656 |
9,463 |
Inventory |
5,157 |
1,698 |
Current assets |
68,657 |
15,886 |
Investments |
2,724 |
2,503 |
Property, plant and equipment |
54,445 |
12,605 |
Intangible exploration and evaluation assets |
15,231 |
10,623 |
Non-current assets |
72,400 |
25,731 |
Total assets |
141,057 |
41,617 |
Liabilities |
||
Trade and other payables |
19,459 |
3,674 |
Deferred income |
495 |
- |
Decommissioning liability |
1,063 |
- |
Current income taxes |
915 |
389 |
Current liabilities |
21,932 |
4,063 |
Deferred income |
737 |
- |
Decommissioning liability |
3,479 |
- |
Deferred income taxes |
290 |
290 |
Non-current liabilities |
4,506 |
290 |
Total liabilities |
26,438 |
4,353 |
Equity |
||
Share capital |
88,785 |
40,275 |
Warrants |
- |
- |
Contributed surplus |
5,666 |
5,128 |
Accumulated other comprehensive loss |
(888) |
(917) |
Retained earnings/(accumulated loss) |
21,056 |
(7,222) |
Total equity |
114,619 |
37,264 |
Equity and liabilities |
141,057 |
41,617 |
Consolidated Statement of Comprehensive Income |
|||
Twelve months ended December 31 | |||
(thousands of United States dollars) |
2017 |
2016 | |
Revenue, net of royalties |
39,166 |
12,914 | |
Revenue |
|||
Direct operating expense |
(10,254) |
(5,282) | |
Gross profit |
28,912 |
7,632 | |
Exploration and evaluation expense |
(187) |
(24,833) | |
Depletion, depreciation and amortisation |
(17,824) |
(3,266) | |
Impairment expense |
- |
(4,303) | |
Reversal of inventory provision |
798 |
479 | |
Stock based compensation |
(538) |
47 | |
Share of profit from joint venture |
1,022 |
1,222 | |
General and administrative expenses |
|||
- Ongoing general and administrative expenses |
(6,420) |
(3,679) | |
- Transaction costs |
(2,373) |
- | |
Operating income/(loss) |
3,390 |
(26,701) | |
Net finance (expense)/income |
(129) |
4 | |
Gain on acquisition |
29,558 |
- | |
Income/(loss) before income taxes |
32,819 |
(26,697) | |
Current income tax expense |
(4,541) |
(1,499) | |
Deferred income tax expense |
- |
(4) | |
Total current and deferred income tax expense |
(4,541) |
(1,503) | |
Net income/(loss) |
28,278 |
(28,200) | |
Other comprehensive income |
|||
Foreign exchange |
29 |
237 | |
Total comprehensive income/(loss) for the period |
28,307 |
(27,963) | |
Net income/(loss) per share |
|||
Basic |
$0.153 |
$(0.394) | |
Diluted |
$0.151 |
$(0.394) |
Consolidated Statement of Changes in Equity |
||||||
Twelve months ended December 31 | ||||||
(thousands of United States dollars) |
2017 |
2016 | ||||
Share capital |
||||||
Balance, beginning of period |
40,275 |
30,148 | ||||
Issuance of common shares |
49,589 |
10,988 | ||||
Share issue costs |
(1,079) |
(861) | ||||
Balance, end of period |
88,785 |
40,275 | ||||
Warrants |
||||||
Balance, beginning of period |
- |
99 | ||||
Expiry of warrants |
- |
(99) | ||||
Balance, end of period |
- |
- | ||||
Contributed surplus |
||||||
Balance, beginning of period |
5,128 |
5,175 | ||||
Share based payments for the period |
538 |
(47) | ||||
Balance, end of period |
5,666 |
5,128 | ||||
Accumulated other comprehensive loss |
||||||
Balance, beginning of period |
(917) |
(1,154) | ||||
Foreign currency translation adjustment for the period |
29 |
237 | ||||
Balance, end of period |
(888) |
(917) | ||||
Retained earnings/(accumulated loss) |
||||||
Balance, beginning of period |
(7,222) |
20,978 | ||||
Net income/(loss) for the period |
28,278 |
(28,200) | ||||
Balance, end of period |
21,056 |
(7,222) | ||||
Total equity |
114,619 |
37,264 |
Consolidated Statement of Cash Flows |
|||
Twelve months ended December 31 | |||
(thousands of United States dollars) |
2017 |
2016 | |
Cash flows generated from/(used in) operating activities |
|||
Income/(loss) before income taxes |
32,819 |
(26,697) | |
Adjustments for: |
|||
Depletion, depreciation and amortization |
17,824 |
3,266 | |
Exploration and evaluation expense |
187 |
24,416 | |
Impairment expense |
- |
4,303 | |
Reversal of inventory provision |
(798) |
(479) | |
Finance expense/(income) |
129 |
(4) | |
Stock based compensation |
538 |
(47) | |
Gain on acquisition |
(29,558) |
- | |
Tax paid by State |
(3,551) |
(1,272) | |
Share of profit from joint venture |
(1,022) |
(1,222) | |
Operating cash flow before working capital movements |
16,568 |
2,264 | |
Decrease/(increase) in trade and other receivables |
4,871 |
(3,001) | |
Increase/(decrease) in trade and other payables |
2,496 |
(408) | |
Increase in inventory |
(1,951) |
(31) | |
Payments for decommissioning |
(4) |
- | |
Cash generated from/(used in) operating activities |
21,980 |
(1,176) | |
Income taxes paid |
(364) |
(766) | |
Net cash generated from/(used in) operating activities |
21,616 |
(1,942) | |
Cash flows (used in)/generated from investing activities: |
|||
Property, plant and equipment expenditures |
(21,132) |
(161) | |
Exploration and evaluation expenditures |
(3,785) |
(11,729) | |
Dividends received |
760 |
825 | |
Acquisition of subsidiaries |
(28,056) |
- | |
Cash balance acquired during the period |
3,108 |
- | |
Net cash used in investing activities |
(49,105) |
(11,065) | |
Cash flows generated from/(used in) financing activities: |
|||
Issuance of common shares |
48,510 |
10,127 | |
Finance costs paid |
(43) |
(96) | |
Net cash generated from financing activities |
48,467 |
10,031 | |
Increase/(decrease) in cash and cash equivalents |
20,978 |
(2,976) | |
Effect of foreign exchange on cash and cash equivalents |
141 |
(469) | |
Cash and cash equivalents, beginning of period |
4,725 |
8,170 | |
Cash and cash equivalents, end of period |
25,844 |
4,725 |
About SDX
SDX is an international oil and gas exploration, production and development company, headquartered in London, England, UK, with a principal focus on North Africa. In Egypt, SDX has a working interest in two producing assets (50% North West Gemsa & 50% Meseda) located onshore in the Eastern Desert, adjacent to the Gulf of Suez. In Morocco, SDX has a 75% working interest in the Sebou concession situated in the Rharb Basin. These producing assets are characterised by exceptionally low operating costs making them particularly resilient in a low oil price environment. SDX's portfolio also includes high impact exploration opportunities in both Egypt and Morocco.
For further information, please see the website of the Company at www.sdxenergy.com or the Company's filed documents at www.sedar.com.
Competent Persons Statement
In accordance with the guidelines of the AIM Market of the London Stock Exchange the technical information contained in the announcement has been reviewed and approved by Paul Welch, Chief Executive Officer of SDX. Mr Welch, who has over 30 years of experience, is the qualified person as defined in the London Stock Exchange's Guidance Note for Mining and Oil and Gas companies. Mr. Welch holds a BS and MS in Petroleum Engineering from the Colorado School of Mines in Golden, CO. USA and an MBA in Finance from SMU in Dallas, TX USA and is a member of the Society of Petroleum Engineers (SPE).
Standard
The estimates of reserves and resources contained in this announcement have been prepared in accordance with the Canadian National Instrument 51-101 (NI 51-101) and the Canadian Oil and Gas Evaluation (COGE) Handbook.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as such term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Glossary
"2P reserves" |
proved and probable reserves |
"bbl" |
stock tank barrel |
"boepd" & "boe/d" |
barrels of oil equivalent per day |
"bopd" & "bbl/d" |
barrels of oil per day |
"Bcf" |
billion standard cubic feet |
"bfpd" |
barrels of fluid per day |
"DD&A" |
depreciation, depletion and amortisation |
"ESP" |
electrical submersible pump |
"mmboe" |
millions of barrels of oil equivalent |
"mcf" |
thousands of cubic feet |
"MMscf/d" |
million standard cubic feet per day |
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 Company's plans, production targets, drilling, seismic work, customer tie ins, pipeline completion, ESP replacement, well workovers, and the timing and costs thereof, as well as capital expenditures, operational expenditures, the reduction in Egyptian receivables and the Company's 2018 outlook, should all 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 labor and services.
All timing given in this announcement, unless stated otherwise is indicative and while the Company endeavors 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; 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 reference SDX's Management's Discussion & Analysis for the three and twelve months ended December 31, 2017, which can be found on SDX's SEDAR profile at www.sedar.com, for a description of additional risks and uncertainties associated with SDX's business, including its exploration activities.
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 term "Netback," which is not a recognized measure under IFRS and may not be comparable to similar measures presented by other issuers. The Company uses this measure 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.
Oil and Gas Advisory
Certain disclosure in this news release constitute "anticipated results" for the purposes of National Instrument 51-101 of the Canadian Securities Administrators because the disclosure in question may, in the opinion of a reasonable person, indicate the potential value or quantities of resources in respect of the Company's resources or a portion of its resources. Without limitation, the anticipated results disclosed in this news release include estimates of flow rate attributable to the resources of the Company. Such estimates have been prepared by management of the Company and have not been prepared or reviewed by an independent qualified reserves evaluator or auditor. Anticipated results are subject to certain risks and uncertainties, including those described above and various geological, technical, operational, engineering, commercial and technical risks. In addition, the geotechnical analysis and engineering to be conducted in respect of such resources is not complete. Such risks and uncertainties may cause the anticipated results disclosed herein to be inaccurate. Actual results may vary, perhaps materially.
SOURCE SDX Energy Inc.
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