Le Lézard
Classified in: Oil industry, Business
Subject: ERN

SDX Energy Inc. Announces Fourth Quarter and Year-End 2017 Financial and Operating Results and Provides Guidance for 2018


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
December 31

Twelve months ended
December 31 (audited)

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
Natural Gas
Discovery

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
 Discovery

14.2m

8.43 MMscf/d

Gharb Centre

ELQ-1*

Uncommercial
Discovery

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
Quarter

Three months
ended December 31


Twelve months ended
December 31

$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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