SDX Energy, the North Africa-focused oil and gas company, has announced its financial and operating results for the three months ended March 31, 2019 and a Directorate change. All monetary values are expressed in United States dollars net to the Company unless otherwise stated.
Q1 2019 production of 3,715 boe/d, an increase of 22% from Q1 2018, due to successful drilling in North West Gemsa and Meseda and increased gas sales in Morocco. Q1 2019 production was, however, 5% lower than Q4 2018 due to increased water cut in North West Gemsa.
Post period end, production at Meseda and in Morocco remained stable, however, production in North West Gemsa continued to decline. Workover programs continued at Meseda and North West Gemsa.
Construction of the South Disouq central processing facility ("CPF"), pipeline and well tie-ins continued in Q1 2019 with first gas now expected to be achieved in Q4 2019.
Q1 2019 net revenues and netback of US$13 million and US$9 million respectively are 15% and 3%, higher than Q1 2018, due to increased production and improved gas prices in Morocco, offset by lower Q1 2019 net realized average oil/service fees of US$55/boe, compared to US$59/boe in Q1 2018.
Operating cash flow before capex in Q1 2019 remained robust at US$7 million with US$13 million of capex being invested in the period, of which US$7 million was related to the South Disouq CPF, pipeline and well tie-ins.
Cash at March 31, 2019 was US$11 million with the US$10 million EBRD facility remaining undrawn.
Paul Welch will be resigning as a director, and as President and Chief Executive Officer, of the Company with effect from May 31, 2019. As part of an ongoing succession plan, Mark Reid, Chief Financial Officer will assume the role of Interim Chief Executive Officer with immediate effect.
A leading oil and gas executive search firm has commenced the process for the recruitment of a new Chief Executive Officer.
A drilling campaign of up to twelve wells is planned for Morocco in Q4 2019/Q1 2020. This will target sufficient reserves to satisfy existing customers' forecast demand and will test new play opening areas of prospectivity across the portfolio.
Due to a slower than anticipated run-rate of new customer additions and a scaling down of certain business lines at an existing customer, 2019 Morocco gas sales guidance is revised to an annual average gross rate of 6.0-6.5MMscf/d, being the estimated contracted volumes from existing customers. Previous guidance was for a 2019 gross exit rate of 9.0-11.0MMscf/d.
In South Disouq, first gas is now expected to be achieved in Q4 2019, with the Company aiming for a gross plateau production rate of c.50 MMscfe/d by Q1 2020 after an initial ramp up phase.
Subject to partner approval, a drilling campaign of up to five exploration wells is planned to commence at South Disouq in 2020. These wells will target the same Abu Madi and Kafr el Sheik prospective horizons that have seen the Company make four discoveries from the five wells drilled to date.
In Meseda, the Company is maintaining its existing gross production guidance of 4,000-4,200 bbl/d and is looking forward to the upcoming drilling of two further development wells, one in each of the Rabul and Meseda discovery areas.
In North West Gemsa, 2019 gross production guidance is reduced to 3,000-3,200 boe/d from 3,400-3,600 boe/d due to increased water cut offsetting the impact of ongoing workovers.
The Company's drilling and development activities set out above are fully funded from expected future cash flows and its existing sources of liquidity.
Michael Doyle, Chairman of SDX Energy, commented: 'The Board would like to thank Paul for his hard work in growing SDX Energy and we wish him well in his future endeavours.
We are also grateful to Mark for taking over as interim CEO. Mark's focus will be to ensure the delivery of our key operational targets at the South Disouq development in Egypt and the upcoming Morocco drilling campaign through the use and optimization of the liquidity that we have available in the Company today.
It is important that the market now has an updated view of how our assets will contribute to the business in the coming months, and our restated guidance today does this. Our focused well programme in Morocco and our commitment to ensure that South Disouq commences production in Q4 2019, before any further drilling takes place in this concession, emphasises our commitment to capital and fiscal discipline in the business going forward.
That said, we are very much looking forward to recommencing drilling in Morocco and South Disouq during 2019/20, and we hope to continue with the successes we have had to date in both locations.
The Board remains very positive about SDX's future growth plans, both from our high quality existing asset portfolio, as well as from new opportunities, a number of which we continue to assess.'