SDX Energy above mid-point guidance as earnings rise

The AIM-traded firm said netback from West Gharib increased due to higher service fee realisations, which outweighed the impact of lower production due to natural decline.

Those factors were partially offset by a lower netback at South Disouq, as a result of lower production due to natural decline and well management activity, including workovers.

EBITDAX, or EBITDA before exploration expenses, was 27% higher for the six months ended 30 June at $19.9m, due to the netback factors.

Depletion, depreciation and amortisation charges totalled $14.9m, rising from $12m a year earlier, which the board put down to higher production and lower 2P reserves in Morocco, partly offset by lower production at West Gharib.

The company recognised a $10.3m non-cash exploration and evaluation impairment following its decision to not commit to further investment in the Lalla Mimouna Nord concession in Morocco after the end of the concession date in July.

In the first half of 2020, $4.5m was written off following the drilling of two sub-commercial wells, SD-6X in South Disouq and SAH-5 in Morocco.

Operating cash flow, before capital expenditure, and excluding discontinued operations, grew 43% to $14.9m, primarily due to the netback drivers.

Capital expenditure totalled $15.8m, which consisted of $8.9mspent on three wells and $2m on well workovers in Morocco, $3.7m for the completion of the SD-12X tie-in at South Disouq, well drilling preparations for IY-2X and HA-1X, the SD-4X well workover, and other projects there, and $1.2m for workovers and development drilling preparations in West Gharib.

Closing cash as at 30 June totalled $9.1m, with the company having satisfied the conditions precedent on the five-year EBRD credit facility, which remained undrawn and had $10m availability.

Together with cash generated from operations, the firm said it was fully funded for all planned activities in 2021 and 2022.

“I am very pleased to report first half 2021 results that show strong growth in revenue, netback, EBITDAX and operating cash flows versus the same period in 2020, as well as ending the period with a strong liquidity position,” said chief executive officer Mark Reid.

“The producing assets in Egypt and Morocco are performing well and we remain above our mid-point guidance for the year.”

Reid said SDX’s drilling activities had yielded three successful wells in Morocco, all of which were now onstream and contributing to cash flow, and one at South Disouq, which was due to start-up shortly.

“As previously announced, whilst the result of the Hanut-1X well is disappointing, I remain positive about the remaining prospectivity in the area which has not been materially impacted.”

At 0802 BST, shares in SDX Energy were up 2.04% at 11.99p.