SDX Energy Announces Interim Results for the Six Months Ended 30 June 2024

SDX Energy plc announces its unaudited interim results for the six months ended 30 June 2024.

The Consolidated Financial Statements of the Group for the six months ended 30 June 2024, containing full financial statements that comply with IFRS, is now available on the Company's website.

Chairman's Review
The first half of 2024 saw SDX continue to build on its strategy to be a best-in-class energy producer. With the sale of the Company's West Gharib assets in Egypt, the continuation of our trade-based financing and (post-period end) the re-negotiation of the convertible loan, we have taken large steps in turning the prospects of the business around.

The focus during 1H 2024 was predominantly the sale of the West Gharib assets, which represented a milestone in the execution of SDX's growth strategy in Morocco, where the Company is the sole independent gas producer. The Executive team and board of directors are focused on delivering long term sustainable value for shareholders.

Finance
In April 2024, SDX received the first instalment of the West Gharib sales proceeds and repaid in full the outstanding secured EBRD reserves-based lending facility amounting to $2.7 million.

The Company's syndicated unsecured convertible loan agreement with Aleph Finance Ltd (the "Lender") was amended in April 2024 to extend the draw down period. This granted the Company access to further gross funding of $0.75 million, which was drawn down in April 2024 to pay service providers in relation to Moroccan drilling activities and general corporate expenses. Post-period end, in September 2024, the Lender and the Company agreed to amend the terms of the existing convertible loan (the "Amended Facility Agreement").

Under the terms of the Amended Facility Agreement, the Lender will provide a term loan facility in the amount of up to $6,500,000, such total amount to be confirmed by the Lender (the "Loan"), to the Company to be repaid by 23 July 2025. Following repayment of the existing convertible loan, the Company intends to draw on approximately $2.0 million of the remaining balance of the Loan. Following the repayment of existing financial indebtedness owed by the Company to the Lender under the existing convertible loan and other agreements, the Company will apply the balance of the monies borrowed under the Amended Facility Agreement towards capital expenditure in Morocco and general corporate creditors. The Loan will be secured against the Company's shares in SDX Energy Morocco (Jersey) Ltd and Sea Dragon Energy (Nile) B.V. and a debenture over the Company, including assignment of intercompany loans and security over HSBC bank accounts in England and various receivables. On 14 October 2024, the Company plans to convene a general meeting to ask shareholders to vote on the Amended Facility Agreement (the "General Meeting"). The completion of the Amended Facility Agreement is conditional upon the Company's shareholders voting in favour of the resolutions at the General Meeting.

Additionally, CITIC Dicastal subsidiary, DIKA MOROCCO AFRICA ("DMA"), continued to prepay each quarter for gas deliveries during Q1, Q2 and Q3 in Morocco.

Operations
During the first half of 2024, in Morocco, the Company produced approximately 407 million cubic feet (68,000 barrels of oil equivalent), averaging 2.3 MMscf/d (1H 2023: 581 million cubic feet averaging 3.2 MMscf/d).

In January 2024, we tied-in the Ksiri-21 ("KSR-21") well in Sebou Central of the Gharb Basin, Morocco and, in April 2024, we received the necessary approvals to commence production of gas. In April 2024, we also commenced drilling the Beni Malek-2 well ("BMK-2") in the Rharb Basin, Morocco, approximately 1.5 km from the BMK-1 discovery well. In May 2024, we completed operations at BMK-2, encountering a 9-metre interval that demonstrated strong gas shows of up to approximately 100 times background gas readings. The well has been left temporarily suspended with a plug set to allow the well to be sidetracked.

Despite challenging capital market conditions and the Board's focus on completing complex transactions, SDX has successfully delivered on the aims of its drilling campaign, with a new well, KSR-21, entering production at the beginning of the year and a new well at BMK-2. The Company is making solid progress towards its goal of transitioning into a hybrid energy producer and infrastructure operator, providing gas to a region with an urgent need to fuel its continued growth.

The Atlantic Free Zone and Kenitra industrial region are of strategic importance not only for SDX, but also for Morocco's long-term growth plans. As the sole independent gas producer in Morocco, and the operator of local pipeline infrastructure, the Board believes SDX is uniquely positioned to power a region that has experienced double-digit growth year-on-year and a commensurate increase in energy demand. We continue to work closely with our partners in the region, including CITIC Dicastal's Moroccan subsidiary, part of a trillion-dollar global group.

To conclude, we thank our shareholders and all our stakeholders for their continued support over this period of transformation and transition for the Company. We maintain our promise to work diligently and energetically to revitalise SDX and leverage the unique position in which the Company finds itself to create significant, sustainable value for our shareholders.

Review of operations

MOROCCO
The Company's Moroccan acreage (where SDX has a 75% working interest and is operator) consists of three petroleum agreements in the Rharb Basin in northern Morocco: Sebou Central, Rharb Occidental and Lalla Mimouna Sud.

The Sebou Central petroleum agreement is a 105 km2 exploration permit with several exploitation concessions contained within it. The exploitation concessions that remain active under the Sebou and Sebou Central petroleum agreement are:
- Ksiri Central, expiry January 2025
- Sidi Al Harati Ouest, expiry October 2024
- Sidi Al Harati Nord, expiry September 2025
- Gaddari Nord, expiry October 2025
- Oulad N'Zala Central, expiry May 2025
- Ksiri Ouest, expiry October 2026

In September 2021, according to the regulations governing petroleum agreements, SDX relinquished 25% of the original Sebou Central acreage and entered into a 2.5 year extension period of the exploration permit. In March 2024, SDX relinquished an additional 10% of the permit area and entered into a Second Extension Period of 1.5 years with expiry in September 2025.

The Rharb Occidental petroleum agreement is an 806 km2 exploration permit with numerous prospects and leads already identified on the existing 3D seismic. The exploitation concessions that remain active under the Rharb Occidental petroleum agreement are:
- Beni Malek Sud-Est, expiry January 2026
- Oulad Youssef Central, expiry August 2025
- Gueddari Sud Ouest, expiry December 2024
- Sidi Al Harati Sud, expiry December 2024

The Company has held the Lalla Mimouna Sud permit since February 2019. A one year force majeure extension to the "Initial Period" of 2.5 years was granted by the Ministry of Energy, which expired in September 2022. SDX has entered into the "First Extension Period" of 2.5 years, expiring in March 2025. The Lalla Mimouna Sud concession is now a 629.9 km2 permit.

All of the Petroleum Agreements remain valid until expiration of the last exploitation concession granted under the relevant Petroleum Agreement.

The Company was awarded the Moulay Bouchta Ouest exploration permit in February 2019 for a total period of eight years. A one-year force majeure extension to the "Initial Period" of the permit was granted by the Ministry of Energy, which expired in September 2023. An extension of 6 months to this period was granted by the Ministry of Energy, which expired in March 2024. We have not sought a further extension and therefore the concession is in process of being relinquished.

1H 2024 Activity
Testing and completion was concluded on the new BMK-1 well in January 2024, combined with the successful connection of the ONHYM pipeline, which connects this well and the surrounding area to our existing infrastructure. BMK-1 commenced production in late January 2024.

By late April 2024, KSR-21 commenced production and the BMK-2 well had been drilled to its total depth of 1,412 metres. BMK-2 has been left temporarily suspended with a plug set to allow the well to be sidetracked, to the target formation at 1,265 metres, once the required equipment has been mobilised. No workovers were conducted in 1H 2024.

For the six months period ended 30 June 2024, Morocco gross production was approximately 407 million cubic feet (68,000 barrels of oil equivalent), averaging 2.3 MMscf/d (1H 2023: 581 million cubic feet averaging 3.2 MMscf/d).

2H 2024 Outlook
SDX has identified two new drilling locations and is in the final stages of securing land permits for each. The newly processed seismic data has been integrated into the original interpretations, further de-risking both prospects, designated as KSR-22 and OLME-A. SDX plans to commence its next drilling campaign during Q4 2024. Gas from these wells will supply our existing customers to serve their expanding needs.

We are currently in discussion with ONHYM in relation to agreeing future permit requirements, which include undertaking new 3D seismic work either in late 2024 or early 2025.

SDX is preparing a tender process to select a partner for the acquisition of over 150 km2 of 3D seismic data. The area selected for this new seismic acquisition campaign is to the north-west of the existing newly merged seismic surveys and has been strategically placed to allow SDX to tie-in to its existing pipeline infrastructure, merge into the newly merged data set while covering a thicker and prospective portion of the basin. SDX anticipates finalising the tender and commencing the seismic acquisition in Q1 2025. The EIA for this project commenced in July and is expected to be completed during Q4 2024.

EGYPT (HELD FOR SALE)
South Disouq
South Disouq is a 115 km2 concession located 65 km north of Cairo in the Nile Delta region. It is on trend with several other prolific gas fields in the Abu Madi Formation.

Development leases have been granted for South Disouq (18 km2), Ibn Yunus (24 km2), and Ibn Yunus North (32 km2), and all development leases are operated by SDX. Production is currently from the Messinian-aged Abu Madi and Pliocene-aged Kafr El Sheikh formations. In addition, SDX operates the Amendment Concession Agreement Area, which is an exploration permit of 41 km2.

At the beginning of 2022, SDX held a 55% interest in the South Disouq and Ibn Yunus development leases and a 100% interest in the Ibn Yunus North development lease. Its partner, IPR, holds a 45% interest in the South Disouq and Ibn Yunus development leases. In February 2022, it was announced that SDX sold 33% of the shares in the entity that holds its interests across its South Disouq concession to Energy Flow Global ("EFG"), a private company with upstream and oilfield services activities in Egypt, the Middle East and Asia. In February 2023, SDX re-acquired these shares in exchange for a 33% direct share of the leases. After this transaction, SDX Energy still has an effective 36.9% working interest in the South Disouq and Ibn Yunus development leases and a 67.0% working interest in the Ibn Yunus North development lease.

1H 2024 Activity
Analysis of the exploration MA-1X well on Mohsen has been completed and the Company is evaluating next steps.

West Gharib
West Gharib is 22 km2 in area and is producing from the Meseda and Rabul fields, both of which are included in the Block-H development lease. The concession is covered by a production service agreement, which allows for lower cost operations than the traditional joint venture structure. SDX had a 50% working interest in the operation, with Dublin International Petroleum, the operator, holding the remaining 50% working interest.

The Meseda field produces 18o API oil from the high-quality Miocene-aged Asl sands of the Rudeis formation. The Rabul field produces 16o API oil from the Miocene-aged Yusr and Bakr sands, which are also part of the Rudeis formation.

In 2021, a 10-year extension for both Meseda and Rabul was agreed with GPC, extending the licence to 9 November 2031. As part of the agreement, the contractors have a minimum commitment to drill six infill development wells (four in Meseda and two in Rabul) and one water-injection well in Rabul by 31 December 2022, and up to another six wells across the concession depending on the prevailing oil price. To take advantage of low drilling costs and the current oil price environment, however, the partnership planned to drill 13 infill development wells from 2022 onwards.

1H 2024 Activity
The infill campaign has continued in 2024.

Workovers of the existing wells have continued in 2024 to maximise production and recovery from the Meseda and Rabul Fields.

2024 Outlook (EGYPT)
Due to issues in relation to currency controls and ongoing devaluations of the Egyptian Pound, it was determined during 2023 that it would be better to focus our resources on our Morocco operations. Therefore, offers for our interests in South Disouq and West Gharib were entertained, and by 31 December 2023 we had entered into advanced negotiations on both assets.

On 19 April 2024, the sale of our interest in West Gharib had been finalised, and we continue to evaluate options to maximise shareholder value for South Disouq, including a sale of the asset or potentially developing it. As part of the West Gharib sale, our investment in Brentford Oil Tools has also been sold. All revenues and costs in relation to these operations have been treated as discontinuing activities in the accounts for the six months period ended 30 June 2024 - the Balance Sheet impact is that the relevant Group Assets and Group liabilities have been reclassified as being Held for Sale.

Environmental, Social and Governance ("ESG")
1H 2024 ESG METRICS
- The Company's operated assets recorded a carbon intensity of 8.8kg CO2e/boe in 1H 2024 (1H 2023: 4.5kg CO2e/boe).
- Scope 1 greenhouse gas emissions from all operated assets were 4,800 tons of CO2e (1H 2023: 5,400 tons of CO2e). Scope 3 greenhouse gas emissions in Morocco were 24,800 tons of CO2e (1H 2023: 30,100 tons of CO2e), which is approximately 11,300 tons of CO2e (1H 2023: 13,800 tons of CO2e) less than using alternative heavy fuel oil.
- There were no Lost Time Injuries at any of the Company's assets during 1H 2024 (1H 2023: none).
- No produced water was discharged into the environment in Morocco or at South Disouq (100% processed or evaporated).
- There were no hydrocarbon spills at operated assets (1H 2023: nil).
- The Company continues to adopt high standards of Governance through its adherence to the QCA Code on Corporate Governance.

Financial Review
Discontinued activities
As at 31 December 2023, the Group had committed itself to the sale of its Egyptian operations. This has translated into the completion of the sale of its 50% holding in Brentford Oil Tools and its interest in the West Gharib concession on 19 April 2024 and a commitment to sell its interest in the South Disouq concession later in 2024 or 2025.

In effect, this renders the Group's entire Egyptian operations as discontinued as at 30 June 2024, and requires their results to be treated as such in the Consolidated Statement of Comprehensive Income and the Consolidated Statement of Cash Flows for the period ending 30 June 2024 and related comparatives under IFRS 5 "Disposal of subsidiaries, business and non-current assets".

Further details, including the results of these discontinued operations, can be found in note 23 to the Consolidated Financial Statements.