TIDMSDX
RNS Number : 0871O
SDX Energy PLC
29 September 2023
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.
29 September 2023
INTERIM RESULTS FOR THE SIX MONTHSED 30 JUNE 2023
SDX Energy plc ("SDX" or the "Company") announces its unaudited
financial and operating results for the six months ended 30 June
2023. All monetary values are expressed in United States dollars
net to the Company unless otherwise stated.
H1 2023 Highlights
-- Net Production, 3,291 boe/d (459 bbls/d and 17.0 mmscf/d)
-- Out of three wells completed across SDX's portfolio in the
year to date, two were put on production during H1 2023.
-- Carbon intensity of 4.5kg CO2e/boe at operated assets during H1 2023.
-- Gross Profit / Netback of $10.1 million, EBITDAX of $8.1
million and operating cash flow (before capex) of $0.9 million.
-- Capex $2.9 million.
The first half of 2023 saw a number of strategic and operational
initiatives. The key senior management hires, the securing of
additional funding, improvements in commercial terms in Morocco and
progress in selling our Egyptian assets has brought a new focus and
clearly defined strategy to the Group. We enter the last part of
2023, and head into 2024, well placed to deliver long-term
sustainable returns to shareholders.
In May 2023, we announced our new Executive team with the
appointment of Daniel Gould as Managing Director, William McAvock
as CFO and Lesley Maclean as Head of Corporate Development. The new
team brings a wealth of experience of the sector and will be
focused on delivering on growth initiatives that will create
long-term sustainable value.
The first half of 2023 was in many ways a period of revitalising
the SDX story. With a new strategy that is based on developing a
hybrid energy producer, the Company announced that it is selling
its Egyptian assets and I am pleased to say that the process
remains firmly on track and the disposal, if completed, would
constitute a fundamental change of business pursuant to AIM Rule
15, because the consideration, as currently calculated in the Heads
of Terms, will significantly exceed the market cap Consideration
Test threshold. The disposal will allow the Company to address some
of the legacy issues inherited from the past and allow the Company
to develop its organic and inorganic growth story in Morocco and
beyond.
Finance
During the first half of 2023, the Company negotiated a
syndicated convertible loan agreement for up to $3.25 million,
which was signed after the end of the six months period, in July
2023. To date, $2.5 million has been drawn for the purposes of
reducing outstanding debt to the European Bank for Reconstruction
and Development (EBRD), the Moroccan drilling campaign and for
general corporate purposes.
Subsequent to the period end, in September 2023, the Company
entered into a non-binding heads of terms with DIKA MOROCCO AFRICA,
its largest offtaker and a 100%-owned subsidiary of Citic Dicastal,
which is a subsidiary of Citic Group, a Chinese holding company
with a corporate portfolio approaching $1 trillion, to prepay for
SDX's gas deliveries in Morocco. The initial terms of the agreement
envisage the receipt of approximately $2 million by the end of
September 2023. These funds are planned to be used towards the
drilling costs of the KSR-21 well and for general corporate
purposes. A further heads of terms for a larger prepayment amount
is currently under negotiation and is expected to be agreed and
funds drawn by early 2024. The Company plans to direct this second
prepayment towards funding a further multi-well back-to-back
drilling programme. This type of back-to-back drilling, which
allows development of gas behind pipe (booked reserves), further
increases operational efficiency, reduces costs and ensures that
immediate and future demand can be met.
Operations
In February 2022, the Company sold 33% of the shares in Sea
Dragon Energy (Nile) B.V., the entity that holds its interests in
the South Disouq concession, to Energy Flow Global Limited ("EFGL")
for a consideration of $5.5 million. From 1 February 2022, the
Company owned 67% of Sea Dragon Energy (Nile) B.V. with the
remaining 33% held by EFGL as a non-controlling interest.
In February 2023, the Company and EFGL, at the request of EGAS,
entered into agreement with EFGL to repurchase the 33% of the
shares in Sea Dragon Energy (Nile) B.V. and signed a Deed of
Assignment to assign 33% of its 55% interest (18.15% interest) in
the South Disouq concession to EFGL. The consideration agreed
represented 33% of the working capital of Sea Dragon Energy (Nile)
B.V. as at February 2023. From February 2023, the Company owned
100% of Sea Dragon Energy (Nile) B.V., which owned a 36.85%
interest in the South Disouq concession.
In South Disouq, Egypt, we undertook workover operations on
SD-3X and SD-4X wells, recompleting the wells to shallower
reservoirs to maximise recovery and on IY-2 to restart
production.
In West Gharib, Eqypt, we continued with our workover operations
on the existing wells to maximise recovery from this field.
Subsequent to the end of the period, in August 2023, we
announced the signing of the heads of terms for the disposal of all
the Company's Egyptian assets to a large multinational operator
with existing Egyptian upstream interests. This strategic decision
allows the Company to focus on the optimisation of its Moroccan
portfolio, including the diversification into the transition energy
sector.
In Morocco, we produced approximately 0.4 billion cubic feet
(69,249 barrels of oil equivalent) during H1 2023. Gas and energy
demand in general in the region remains high and, in June 2023, we
renegotiated the gas sales agreement with one of our key customers
and received a higher gas price for production with effect from 1
May 2023.
In September 2023, we commenced drilling the Ksiri-21 ("KSR-21")
well in Sebou Central of the Gharb Basin, Morocco. The KSR-21 well
has reached its total vertical depth of 1,955 metres (1,966 metres
measured depth) targeting a prospect within the Hoot formation,
which is one of the main producing formations in the area. Drilling
and wireline logging data confirm the presence of gas charged sands
within the targeted reservoir section. The reservoir interval will
now be perforated to undergo a short testing period before being
brought onto production to supply existing gas offtakers.
We thank all our stakeholders and shareholders for their support
over the last period, as we work tirelessly to revitalise the
business and deliver long-term sustainable value to shareholders.
We would also like to express our condolences to all those affected
by the devastating earthquake in Morocco earlier this month and
continue to offer our support.
Jay Bhattacherjee
Interim Executive Chairman
28 September 2023
Review of operations H1 2023
EGYPT South Disouq
South Disouq is a 115km(2) concession located 65km 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 km(2)
), Ibn Yunus (24 km(2) ), and Ibn Yunus North (32 km(2) ), 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 41km(2) .
In February 2022, the Company sold 33% of the shares in Sea
Dragon Energy (Nile) B.V. to Energy Flow Global Limited ("EFGL")
for a consideration of US$5.5 million. From 1 February 2022, the
Company owned 67% of Sea Dragon Energy (Nile) B.V. with the
remaining 33% held by EFGL as a non-controlling interest
("NCI").
On 22 February 2023, at the request of EGAS, the Company and
EFGL entered into agreement with EFGL to repurchase the 33% of the
shares in Sea Dragon Energy (Nile) B.V. in exchange for deferred
consideration of $1.6 million plus an assignment of 33% of the
Company's 55% interest (equivalent to a direct 18.15% interest),
with a fair value of $5.5 million, in the South Disouq concession
to EFGL. From 22 February 2023, the Company owned 100% of Sea
Dragon Energy (Nile) B.V. and a 36.85% interest in the South Disouq
concession.
As a result, SDX has a 36.85% working interest in the South
Disouq and Ibn Yunus development leases and a 67.0% working
interest in the Ibn Yunus North development lease. Its partner,
EFGL, has a 18.15% working interest in the South Disouq and Ibn
Yunus development leases and a 33.0% working interest in the Ibn
Yunus North development lease; and its partner, IPR, holds a 45%
interest in the South Disouq and Ibn Yunus development leases.
H1 2023 Activity
Throughout H1 2023, planned field management operations were
carried out and the Central Processing Facility showed excellent
performance with a 99% uptime.
The SD-12X well is currently shut-in, as this well shares a
flow-line with the SD-12_East well and the higher pressure is
backing-out SD-12X. Once the pressure equilibrates, SD-12X will be
brought back on-line.
SD-1X continues to be produced intermittently since July 2022.
IY-2X was worked-over with a sand bond, with the aim of reducing
sand production. Unfortunately, the sand bond did not prevent sand
production during the testing phase and the well has been shut-in
pending further investigation.
Following the 2022 drilling campaign, SDX continues to work on
updating plans for future drilling and identifying remaining
targets in the acreage. The Mohsen discovery is currently under
evaluation, to determine future development options and work has
been ongoing to finalise a field development plan.
Production operations at the asset ended up in the expected
range during the six months to 30 June 2023, resulting in gross
production of 36.32 MMscfe/d for the year (2,558boe/d net to
SDX).
H2 2023 Outlook
The primary work in H2 2023 will be around finalising the Mohsen
discovery's field development plan. Workovers of SD-4X and SD-3X
are planned, with the wells being recompleted to shallower
reservoirs as the main reservoir becomes fully depleted, and
further work will be carried out to identify alternative solutions
for a recompletion at IY-2X.
EGYPT West Gharib
West Gharib is 22 km(2) in area and is currently 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 has a
50% working interest in the operation, with Dublin International
Petroleum, the operator, holding the remaining 50% working
interest.
The Meseda field produces 18(o) API oil from the high-quality
Miocene-aged Asl sands of the Rudeis formation. The Rabul field
produces 16(o) 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 General Petroleum Company ("GPC"), which is a state oil
company, 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 through 2022 and into 2023.
H1 2023 Activity
Much of the activity in the West Gharib concession during H1
2023 was centred around the aforementioned infill drilling
campaign: Rabul-9ST was drilled in January 2023 and the last infill
well Rabul-8, was drilled in May 2023. Additionally, fourteen
workovers were carried out across the concession in H1 2023.
For H1 2023, West Gharib average gross sales production stood at
approximately 1,834 bbl/d (351 bbl/d net to SDX).
H2 2023 Outlook
It is still planned to workover the Rabul Deep-1 well to convert
it to a water-injector for the Rabul Field. With the completion of
the infill drilling campaign the partnership will review the
results of all the drilling and consider additional development
wells.
Workovers of the existing wells is planned to continue
throughout 2023 to maximise production and recovery from the Meseda
and Rabul Fields.
MOROCCO
The Company's Moroccan acreage (where SDX has a 75% working
interest and is operator) consists of four exploration permits. All
SDX's permits are in the Gharb Basin in northern Morocco: Sebou
Central, Gharb Occidental, Lalla Mimouna Sud, and Moulay Bouchta
Ouest.
The Sebou Central permit is a 132 km(2) exploration permit with
several exploitation concessions contained within it. The
exploitation concessions granted under the Sebou Onshore Petroleum
Agreement are Sidi Al Harati SW, which expires in September 2023,
Sidi Al harati W, which expires in October 2024, and Ksiri Central,
which expires in January 2025.
The Gharb Occidental concession is an 806 km(2) exploration
permit with numerous prospects and leads already identified on the
existing 3D seismic, which covers the southern part of the permit.
The exploitation concessions granted under the Gharb Occidental
Petroleum Agreement are Oulad Youssef Central, which expires in
March 2024, and Guaddari Sud-Ouest and Sidi Al Harati Sud which
both expire in December 2024.
The Company has held the Lalla Mimouna Sud permit since February
2019. This permit has a duration of eight years, with a commitment
to drill one exploration well and acquire 50 km(2) of 3D seismic
within the first two-and-a-half-year period, which has been met,
and started on 14 March 2019.
In September 2021, according to the regulations governing
Petroleum Agreements, SDX relinquished 25% of the original Lalla
Mimouna Sud acreage and entered into the extension period of 2.5
years. The Lalla Mimouna Sud concession is now a 629.9 km(2)
permit.
The Company was awarded the Moulay Bouchta Ouest exploration
concession in February 2019 for a period of eight years. The
commitment to reprocess 150 km of 2D seismic data, acquire 100
km(2) of new 3D seismic, and drill one exploration well within the
first three-and-a-half-year period, started on 14 March 2019. A one
year force majeure extension to the permit was granted by the
Ministry of Energy, which expires in September 2023. The concession
is in process to be relinquished.
H1 2023 Activity
During H1 2023 production has been carefully managed to ensure
supply to existing customers. The two compressors SDX operates in
Morocco have also been actively managed maximising recovery from
existing wells.
Morocco net production averaged 2.30 MMscf/d for H1 2023.
H2 2023 Outlook
The Company commenced drilling KSR-21 well on 2 September 2023
and reached its total vertical depth of 1,955 metres (1,966 metres
measured depth) on 26 September 2023. The well will be completed as
a producer and brought onstream to produce gas as soon as possible.
This well forms the start of a wider drilling campaign of wells,
some of which will target low-risk prospects and some will target
new areas and play levels, expanding the development footprint. All
the wells will be shallow targets charged with biogenic gas. Gas
from these wells will supply the existing customers and an
additional factory that has been constructed by one of those
existing customers.
H1 2023 ESG METRICS
-- The Company's operated assets recorded a carbon intensity of 4.5kg CO2e/boe in H1 2023.
-- Scope 1 greenhouse gas emissions from all operated assets
were 5,400 tons of CO2e. Scope 3 greenhouse gas emissions in
Morocco were 30,100 tons of CO2e, which is approximately 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 H1 2023.
-- 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.
-- The Company continues to adopt high standards of Governance
through its adherence to the QCA Code on Corporate Governance.
Financial Review
Operational and Financial Highlights
In accordance with industry practice, production volumes and
revenues are reported on a Company interest basis, before the
deduction of royalties.
Six months ended 30 June
$'000s 2023 2022
--------------------------------------------- ------------------------------------ --------------------------------
West Gharib production service fee revenues 3,467 5,672
South Disouq gas sales revenue (1) 8,789 11,032
Royalties (2,963) (3,717)
------------------------------------ --------------------------------
Net South Disouq gas revenue 5,826 7,315
Morocco gas sales revenue 4,901 7,517
Royalties (51) (146)
Net Morocco gas sales revenue 4,850 7,371
Net other products revenue 1,110 1,975
Total net revenue (4) 15,253 22,333
Direct operating expense (5,127) (4,392)
Netback: West Gharib 1,816 4,148
Netback: South Disouq gas (2) 3,519 5,400
Netback: Morocco gas 3,681 6,418
Netback: Other products (2) 1,110 1,975
Netback (pre-tax) (3) (4) 10,126 17,941
EBITDAX (3) (4) 8,120 15,274
------------------------------------ --------------------------------
West Gharib production service fee (bbl/d) 351 376
South Disouq gas sales (boe/d) (5) 2,818 3,534
Morocco gas sales (boe/d) 383 638
Other products sales (boe/d) (5) 124 179
Total sales volumes (boe/d) (5) 3,676 4,727
West Gharib production service fees (bbls) 63,523 67,968
South Disouq gas sales (boe) (5) 510,017 639,713
Morocco gas sales (boe) 69,249 115,398
Other products sales (boe) (5) 22,405 32,400
Total sales volumes (boe) (5) 665,194 855,479
Brent oil price (US$/bbl) $79.78 $107.50
West Gharib oil price (US$/bbl) $64.33 $98.64
Realised West Gharib service fee (US$/bbl) $54.58 $83.45
Realised Morocco gas price (US$/mcf) $11.80 $10.86
Royalties (US$/boe) (4) $5.34 $5.86
Operating costs (US$/boe) (4) $7.71 $5.13
Netback (US$/boe) (4) $15.22 $20.97
Capital expenditures 2,870 12,173
------------------------------------ --------------------------------
1) South Disouq gas is sold to the Egyptian State at a fixed
price of $2.65MMbtu, which equates to approximately $2.85/Mcf.
2) When calculating Netback for South Disouq gas and other
products (condensate), all South Disouq operating costs are
allocated to gas, as associated products have assumed nil
incremental operating costs.
3) Netback and EBITDAX are non-IFRS measures and are defined on page 7.
4) In February 2022, the Company sold 33% of the shares in Sea
Dragon Energy (Nile) B.V. to Energy Flow Global Limited ("EFGL")
for a consideration of US$5.5 million. From 1 February 2022, the
Company owned 67% of Sea Dragon Energy (Nile) B.V. with the
remaining 33% held by EFGL as a non-controlling interest ("NCI").
On 22 February 2023, at the request of EGAS, the Company and EFGL
entered into agreement with EFGL to repurchase the 33% of the
shares in Sea Dragon Energy (Nile) B.V. in exchange for deferred
consideration of $1.6 million plus an assignment of 33% of the
Company's 55% interest (equivalent to a direct 18.15% interest),
with a fair value of $5.5 million, in the South Disouq concession
to EFGL. From 22 February 2023, the Company owned 100% of Sea
Dragon Energy (Nile) B.V. and a 36.85% interest in the South Disouq
concession. Before that date the Company consolidated the results
of its subsidiary in the Company's condensed consolidated financial
statements.
5) Sales volumes from the South Disouq concession have been
presented gross of minority interest to the date of the
reconstitution (22 February 2023). The share of volumes assigned to
the Company's minority interest holder equals 69,500 boe (384
boe/d) and therefore the Company's share of South Disouq volumes
(incl. other products) equals 462,923 boe (2,558 boe/d). Net of
minority interest total sales volumes are 595,694 boe (3,291
boe/d).
West Gharib production service fee revenues
The Company recorded service fee revenue relating to the oil
production from the Meseda and Rabul areas of Block H that is
delivered to General Petroleum Company, which is a state oil
company ("GPC"). The Company is entitled to a service fee of
between 19.00% and 19.25% of the delivered volumes and has a 50%
working/paying interest. The service fee revenue is based on the
current market price of West Gharib crude oil, adjusted for a
quality differential.
Production service fee pricing
For the six months ended 30 June 2023, the Company received an
average service fee per barrel of oil of $54.58, compared to the
average West Gharib oil prices for the periods of $64.33,
representing a quality discount of $9.75 (15%) per barrel. For the
six months ended 30 June 2022, the Company received an average
service fee per barrel of oil of $83.45, compared to the average
West Gharib oil prices for the periods of $98.64, representing a
quality discount of $15.19 (15%) per barrel.
Production service fee variance from prior year
For the six months ended 30 June 2023 (compared to the six
months ended 30 June 2022), the decrease in production service fee
revenue by $2.2 million (39%) from $5.7 million to $3.5 million was
driven by a decrease in price of $1.8 million (32%) and a decrease
in production of $0.4 million (7%). The lower production is owing
to natural field decline and an increase in water cut across
several wells partly offset by the contribution of well workover
results and seven wells that came into production during H1 2023 as
part of the ongoing development drilling campaign.
$'000s
------------------------- --------
Year ended 30 June 2022 5,672
Price variance (1,834)
Production variance (371)
Year ended 30 June 2023 3,467
--------------------------- --------
South Disouq gas sales revenue
The Company sells gas production from the South Disouq
concession to the Egyptian Natural Gas Holding Company ("EGAS"),
which is an Egyptian state-owned holding company, at a fixed price
of $2.65/MMbtu, approximately $2.85/Mcf. The Government of Egypt's
entitlement share of gross production from the asset equates to
approximately 51%.
South Disouq gas sales variance from prior year
For the six months ended 30 June 2023 (compared to six months
ended 30 June 2022), the decrease in South Disouq gas sales revenue
of $2.2 million (20%) is the result of a decrease in sales volumes
of 716boe/d.
The decrease in sales volumes is due to assigning 33% of the
Company's interest in South Disouq to EFGL during the six months
period and increased water and sand production due to natural field
decline.
On 22 February 2023, the Company assigned a direct 18.15%
interest (33% of the Company's previous 55% interest) in the South
Disouq concession to EFGL by way of a Deed of Assignment.
There was no scheduled or unscheduled downtime at the Central
Processing Facility ("CPF") during the year ended 30 June 2023.
Morocco gas sales revenue
The Company currently sells natural gas to three industrial
customers in Kenitra, northern Morocco. The Company decided not to
immediately renew a customer contract that expired on 1 April 2023
until the Company has better visibility on future gas supply and
pricing to support the full term of a new contract.
Morocco gas sales variance from prior year
For the six months ended 30 June 2023 (compared to six months
ended 30 June 2022), the decrease in Morocco gas sales revenue of
$2.6 million (35%) is driven by a $3.0 million decrease in
production due to limited gas reserve, partially offset by $0.4
million increase due to selling gas at higher prices.
$'000s
------------------------- --------
Year ended 30 June 2022 7,517
Price variance 390
Production variance (3,006)
Year ended 30 June 2023 4,901
--------------------------- --------
Royalties
Royalties in Egypt fluctuate from quarter to quarter because of
changes in production and the impact of commodity prices on the
amount of cost oil or gas allocated to the contractors. In turn,
there is an impact on the amount of profit oil or gas from which
royalties are calculated.
In Morocco, sales-based royalties become payable when certain
inception-to-date production thresholds are reached, according to
the terms of each exploitation concession.
Direct operating costs
Direct operating costs for the six months ended 30 June 2023
were $5.1 million, compared to $4.4 million for the comparative
period of the prior year.
The direct operating costs per concession were:
Six months ended 30 June
$'000s 2023 2022
-------------------------------- ------------- ------------
West Gharib 1,651 1,524
South Disouq 2,307 1,915
Morocco 1,169 953
------------- ------------
Total direct operating expense 5,127 4,392
-------------------------------- ------------
The direct operating costs per unit per concession were:
Six months ended 30 June
$/boe 2023 2022
-------------------------------------- ------------- ------------
West Gharib 25.99 22.42
South Disouq 4.33 2.85
Morocco 16.88 8.26
------------- ------------
Total direct operating costs per boe 7.71 5.13
------------- ------------
West Gharib
Direct operating costs per barrel ("bbl") for the six months
ended 30 June 2023 for West Gharib were higher at $25.99/bbl,
compared to $22.42 in the comparative period of the prior year, due
to lower production and higher costs of increased water cut across
several wells.
South Disouq
Direct operating costs per boe for the six months ended 30 June
2023 for South Disouq were higher at $4.33/boe compared to
$2.85/boe in the comparative period of the prior year. This
increase of $0.4 million resulted from the review and correction of
the Company's share in operational expenditures associated with the
IY-N field.
Morocco
Operational expenditure in Morocco is less dependent on
production volume, as certain expenditure is fixed in nature, e.g.
headcount and compressor/separator rentals, might be impacted by
expenditure that is one-off in nature.
Direct operating costs for the six months ended 30 June 2023
were $0.2 million (23%) higher compared with the comparative period
of the prior year as a result of additional operating expenditure,
including adding security guards for the wells. This higher
incurred expenditure, together with the reduction in production,
caused the direct operating costs per boe to increase by 104% to
$16.88/boe.
General and administrative expenses
Six months ended 30 June
$'000s 2023 2022
------------------------------------ -------------- -----------
Wages and employee costs 2,311 2,482
Consultants - inc. PR/IR 158 190
Legal fees 103 173
Audit, tax and accounting services 289 338
Public company fees 349 279
Travel 122 84
Office expenses 247 315
IT expenses 82 167
Service recharges (1,157) (1,986)
--------------
Ongoing general and administrative
expenses 2,504 2,042
Transaction costs 55 765
--------------
Total net G&A 2,559 2,807
Ongoing general and administrative ("G&A") costs for the six
months ended 30 June 2023 were $2.5 million which is $0.5 million
higher compared to the same period of the prior year due to a lower
recharge of G&A to operational and capital expenditure
partially offset by a reduction in employee-related expenditure,
primarily due to reversal of the 2021 bonus previously accrued for
the UK team, and natural attrition.
Capital expenditures
The following table shows the capital expenditure for the
Company. It agrees with notes 7 and 8 to the consolidated condensed
financial statements for the six months ended 30 June 2023, which
include discussion therein.
Six months ended
30 June
$'000s 2023 2022
-------------------------------------------- -------- ---------
Property, plant and equipment expenditures
("PP&E") 505 5,169
Exploration and evaluation expenditures
("E&E") 2,358 6,971
Office furniture and fixtures 7 33
--------
Total capital expenditures 2,870 12,173
--------
The Company has future capital commitments associated with its
oil and gas assets, details of which can be found in note 18 to the
consolidated condensed financial statements.
Exploration and evaluation expense
For the six months ended 30 June 2023, exploration and
evaluation expenses stood at $0.4 million, compared to $0.5 million
in the same period of the prior year.
The current period expense relates mainly to:
-- a write off of $0.3 million for an unsuccessful exploration
well drilled in Rabul area in West Gharib; and
-- new business evaluation activities of $0.1 million
The prior period expense of $0.5 million relates to new business
evaluation activities.
Depletion, depreciation and amortisation
For the six months ended 30 June 2023, depletion, depreciation,
and amortisation ("DD&A") amounted to $6.3 million, compared to
$10.4 million in the same period of the prior year, a reduction of
$4.1 million.
Six months ended 30 June
$'000s 2023 2022
--------------------- ------------ -------------
West Gharib 782 726
South Disouq 2,785 4,492
Morocco 2,409 4,912
Right of use assets 269 225
Other 15 11
Total DD&A 6,260 10,366
The DD&A movement by concession is primarily the result of
the following:
-- The DD&A for South Disouq was $2.8 million for the six
months ended 30 June 2023, a decrease of $1.7 million from the same
period of the prior year due to a significant reduction in asset
base following the sale of 33% of the Company's interest in South
Disouq to EFGL and reducing the net book value of the asset by $5.1
million;
-- The decrease of $2.5 million in DD&A for Morocco for the
six months ended 30 June 2023 compared to the same period of the
prior year is due to significant reduction in asset since H1 2022
following 2022 production and the $4.8 million impairment charge
recorded in Q4 2022; and
-- The DD&A for right-of-use assets was $0.3 million and
related to the recognition of leases under IFRS 16. Please refer to
note 17 in the consolidated condensed financial statements.
Foreign exchange loss
In March 2022, Egypt devalued its currency, the Egyptian pound
("EGP"), in response to macroeconomic circumstances driven by
Russia's invasion of Ukraine. Shortly after this devaluation, the
EGP dropped to c.18.2 to the US dollar, after having traded at
c.15.7 EGP to the US dollar since November 2020. In the six months
ended 30 June 2023, Egypt further devalued its currency with the
EGP dropping to 30.75 to the US dollar. The mechanism for
collecting receivables in Egypt is not impacted by this devaluation
as receivables are settled in US dollars, or the EGP equivalent, on
the date payment is made. Costs of the Egyptian operations
denominated in EGP are not impacted by the currency devaluation.
The $1.3 million foreign exchange loss for the six months ended 30
June 2023 is mainly the result of the impact on the EGP cash
balance ($0.9 million).
Sources and uses of cash
The Company's net cash position as at 30 June 2023 was $3.0
million, with cash balances of $6.7 million offset by $3.5 million
debt and $0.2 million accrued interest from the EBRD debt facility.
The restriction on exchanging EGP into US dollars is ongoing and
the Company is currently unable to expatriate any cash currently
available in Egypt.
The following table sets out the Company's sources and uses of
cash for the six months ended 30 June 2023 and 2022:
Six months ended
30 June
$'000s 2023 2022
-------------------------------------------- --------- ---------------------------------
Sources
Operating cash flow before working
capital movements 5,746 12,298
Borrowings - 2,500
Net proceeds from sale of assets - 5,500
Finance income 56 -
Dividends received 0 311
--------- ---------------------------------
Total sources 5,802 20,609
--------- ---------------------------------
Uses
Changes in non-cash working capital (4,187) (1,095)
Property, plant and equipment expenditures (255) (6,175)
Exploration and evaluation expenditures (1,391) (5,369)
Payments of lease liabilities (278) (261)
Finance costs paid - (17)
Income taxes paid (644) (841)
Loan repayments (2,200) -
Effect of foreign exchange on cash
and cash equivalents (738) (2,141)
Total uses (9,693) (15,899)
(Decrease)/increase in cash and cash
equivalents (3,891) 4,710
Cash and cash equivalents at beginning
of period 10,613 10,562
Cash and cash equivalents at end of
period 6,722 15,272
Going Concern
The Directors have reviewed the cash flow projections prepared
by management for the period ending 31 December 2024 and believe
that there exists a material uncertainty that may cast significant
doubt over the ability of the Group to continue as a going concern.
As a result of various geopolitical factors, US dollar transfers by
the Central Bank of Egypt have been restricted and the Company is
currently unable to expatriate any funds currently in Egypt and
there can be no guarantee of timing on when funds will become
available. These factors have also impacted the Egyptian pound
which has been devalued several times since March 2022 and is
currently trading at less than half of its value compared with the
USD since that date. Whilst the company's receivables are not
impacted by this devaluation, the company's cash balance in country
is fully exposed to any additional currency fluctuations. In
addition, the Board believes it has options to raise external
capital, the Board however cannot guarantee the final quantum and
timings of any proposed financing. The Board would also note
that there are no guarantees that arrangements with creditors
will remain negotiable.
Notwithstanding the material uncertainty identified, the
Directors have concluded that the Group will have sufficient
resources to continue as a going concern for the period of
assessment, that is for a period of not less than 12 months from
the date of approval of the Condensed Consolidated financial
statements. Accordingly, the Condensed Consolidated financial
statements have been prepared in a going concern basis and do not
reflect any adjustments that would be necessary if this basis were
inappropriate.
Non-IFRS measures
The Financial Review contains the terms "netback" and "EBITDAX",
which are not recognised measures under IFRS. The Company uses
these measures to help evaluate its performance. Please see note 16
to the Condensed Consolidated Financial Statements for a
reconciliation of these non-IFRS measures to IFRS.
Netback
Netback is a non-IFRS measure that represents sales net of all
operating expenses and government royalties. Management believes
netback to be a useful supplemental measure to analyse 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 because it demonstrates the Company's
profitability relative to current commodity prices. Netback may not
be comparable to similar measures other companies use.
EBITDAX
EBITDAX is a non-IFRS measure that represents earnings before
interest, tax, depreciation, amortisation, exploration expense, and
impairment, which is operating income/(loss) adjusted for the
add-back of depreciation and amortisation, exploration expense, and
impairment of property, plant, and equipment (if applicable).
EBITDAX is presented so that users of the financial statements can
understand the cash profitability of the Company, excluding the
impact of costs attributable to exploration activity, which tend to
be one-off in nature, and the non-cash costs relating to
depreciation, amortisation and impairments. EBITDAX may not be
comparable to similar measures other companies use.
Jay Bhattacherjee
Interim Executive Chairman
28 September2023
Condensed Consolidated Balance Sheet (unaudited)
As at 30 June 2023
As at As at
30 June 31 December
($'000s) Note 2023 2022
-------------------------------------- ----- -------------
Assets
Cash and cash equivalents 5 6,722 10,613
Trade and other receivables 5 19,811 18,549
Inventory 6 8,244 7,988
------------------------------------------- ----- -------------
Current assets 34,777 37,150
Investments 3,529 3,390
Property, plant and equipment 7 14,584 25,205
Exploration and evaluation assets 8 13,627 11,618
Right-of-use assets 17 1,135 1,147
--------------------------------------- ----- -------------
Non-current assets 32,875 41,360
Total assets 67,652 78,510
--------------------------------------- ----- -------------
Liabilities
Trade and other payables 9 24,280 22,787
Current income taxes 11 403 854
Borrowings 5 3,714 5,658
Lease liability 17 529 441
--------------------------------------- ----- -------------
Current liabilities 28,926 29,740
Decommissioning liability 10 5,886 6,349
Deferred income taxes 290 290
Lease liability 17 660 723
--------------------------------------- ----- -------------
Non-current liabilities 6,836 7,362
Total liabilities 35,762 37,102
--------------------------------------- ----- -------------
Equity
Share capital 2,601 2,601
Share premium 130 130
Share-based payment reserve 6,895 7,174
Accumulated other comprehensive loss (917) (917)
Merger reserve 37,034 37,034
(Accumulated loss)/retained earnings (13,853) (10,872)
Non-controlling interest 19 - 6,258
Total equity 31,890 41,408
--------------------------------------- ----- -------------
Equity and liabilities 67,652 78,510
---------------------------------------- ----- -------------
The notes are an integral part of these Condensed Consolidated
Financial Statements.
The financial statements on pages 10 to 25 were approved by the
board of directors on 28 September 2023 and signed on its behalf
by:
Jay Bhattacherjee Timothy Linacre
Interim Executive Chairman Non-Executive Director
Condensed Consolidated Statement of Comprehensive Income
(unaudited)
For the six months ended 30 June 2023
Six months ended 30 June
($'000s) Notes 2023 2022
-------------------------------------------------- ------ --------------
Revenue, net of royalties 13 15,253 22,333
Direct operating expense (5,127) (4,392)
Gross profit 10,126 17,941
Exploration and evaluation expense 8 (437) (534)
Depletion, depreciation and amortisation 7,17 (6,260) (10,366)
Share-based compensation 12 (72) (122)
Share of profit from joint venture 268 262
Gain on part disposal of asset 7 357 -
- Ongoing general and administrative expenses 14 (2,504) (2,042)
- Transaction costs 14 (55) (765)
--------------------------------------------------- ------ ------------- --------------
Operating loss 1,423 4,374
Finance costs (472) (188)
Foreign exchange loss 20 (1,348) (2,238)
Loss before income taxes (397) 1,948
Current income tax expense 11 (2,093) (3,151)
Loss and total comprehensive loss for the period (2,490) (1,203)
------------------------------------------------------
Attributable to
SDX shareholders - (761)
Non-controlling interests 19 - (442)
Net loss, attributable to SDX shareholders,
per share
Basic 15 $(0.012) $(0.004)
Diluted 15 $(0.012) $(0.004)
------------------------------------------------------ ------ ------------- ------------
The notes are an integral part of these Condensed Consolidated
Financial Statements.
Condensed Consolidated Statement of Changes in Equity
(unaudited)
For the six months ended 30 June 2023
Six months ended
30 June
($'000s) Note 2023 2022
-------------------------- ----- ------------------------------------- ------------------------------------
Share capital
Balance, beginning of
period 2,601 2,601
------------------------------------- ------------------------------------
Balance, end of period 2,601 2,601
Share premium
Balance, beginning of
period 130 130
------------------------ ----- ------------------------------------
Balance, end of period 130 130
Share-based payment
reserve
Balance, beginning of
period 7,174 7,536
Share-based compensation
for the period 12 72 122
Share-based options
terminated 12 (351) -
------------------------- ----- ------------------------------------
Balance, end of period 6,895 7,658
Accumulated other
comprehensive loss
Balance, beginning of
period (917) (917)
Balance, end of period (917) (917)
Merger reserve
Balance, beginning of
period 37,034 37,034
Balance, end of period 37,034 37,034
Retained earnings
Balance, beginning of
period (10,872) 26,270
Part repurchase /
disposal of subsidiary (842) (2,736)
Share-based options
terminated 12 351 -
Total comprehensive
loss (2,490) (761)
------------------------ ----- ------------------------------------
Balance, end of period (13,853) 22,773
Non-controlling
interest
Balance, beginning of
period 6,258 -
Part (repurchase) /
disposal of subsidiary 19 (6,258) 8,236
Loss for the period 19 - (442)
----------------------- ----- ------------------------------------- ------------------------------------
Balance, end of period 0 7,794
Total equity 31,890 77,073
----------------------- ----- ------------------------------------
The notes are an integral part of these Condensed Consolidated
Financial Statements.
Condensed Consolidated Statement of Cash Flows (unaudited)
For the six months ended 30 June 2023
Six months ended 30
June
($'000s) Note 2023 2022
------------------------------------ ----- ------------------------------------ -----------------------------------
Cash flows generated from/(used
in) operating activities
(Loss)/gain before income taxes (397) 1,948
Adjustments for:
Depletion, depreciation and
amortisation 7,17 6,260 10,366
Exploration and evaluation expense 8 351 -
Finance expense 472 188
Share-based compensation charge 12 72 122
Foreign exchange loss 20 1,348 2,238
Tax paid by state 11 (1,735) (2,302)
Gain on asset part disposal 7 (357) -
Share of profit from joint venture (268) (262)
------------------------------------ ----- ------------------------------------ -----------------------------------
Operating cash flow before working
capital movements 5,746 12,298
(Increase)/decrease in trade
and other receivables 5 (1,133) 2,090
Decrease in trade and other
payables 9 (2,066) (2,053)
Payments for inventory 6 (325) (1,097)
Payments for decommissioning (663) (35)
Cash generated from operating
activities 1,559 11,203
Income taxes paid 11 (644) (841)
------------------------------------ ----- -----------------------------------
Net cash generated from operating
activities 915 10,362
Cash flows generated from/(used
in) investing activities:
Property, plant and equipment
expenditures 8 (255) (6,175)
Exploration and evaluation
expenditures 7 (1,391) (5,369)
Proceeds on part disposal of
subsidiary - 5,500
Dividends received 0 311
Net cash used in investing
activities (1,646) (5,733)
Cash flows generated from/(used
in) financing activities:
(Repayments)/net proceeds from
loans and borrowings 5 (2,200) 2,500
Payments of lease liabilities 17 (278) (261)
Finance income/(expense) 56 (17)
------------------------------------ ----- -----------------------------------
Net cash (used in)/ generated
from financing activities (2,422) 2,222
(Decrease)/increase in cash
and cash equivalents (3,153) 6,851
Effect of foreign exchange on
cash and cash equivalents 20 (738) (2,141)
Cash and cash equivalents,
beginning
of period 10,613 10,562
------------------------------------ ----- -----------------------------------
Cash and cash equivalents, end
of period 6,722 15,272
------------------------------------ ----- -----------------------------------
The notes are an integral part of these Condensed Consolidated
Financial Statements.
Notes to the Condensed Consolidated Financial Statements
For the six months ended 30 June 2023
1. Reporting entity
SDX Energy Plc ("SDX" or "the Company") is a public limited
company incorporated and domiciled in England and Wales. The
address of the Company's registered office is 38 Welbeck Street,
London, United Kingdom, W1G 8DP. The Condensed Consolidated
Financial Statements of the Company as at and for the period ended
30 June 2023 and 2022 ("Condensed Consolidated Financial
Statements") comprise the Company and its controlled subsidiaries
and include the Company's share of joint arrangements (together the
"Group").
The Company's shares trade on the London Stock Exchange's
Alternative Investment Market ("AIM") in the United Kingdom under
the symbol "SDX".
The Company is engaged in the exploration for and development
and production of oil and natural gas. The Company's principal
properties are in the Arab Republic of Egypt and the Kingdom of
Morocco.
2. Basis of preparation
a) Statement of compliance
These Condensed Consolidated Financial Statements are unaudited
and include the financial statements of the Company and its
subsidiary undertakings. They have been prepared using accounting
bases and policies consistent with those used in the preparation of
the financial statements of the Company and the Group for the year
ended 31 December 2022. These statements do not include all of the
disclosures required for annual financial statements, and
accordingly, should be read in conjunction with the financial
statements and other information set out in the Company's 31
December 2022 Annual Report, which were prepared in accordance with
UK-adopted international accounting standards, and in compliance
with International Financial Reporting Standards issued by the
International Accounting Standards Board (IFRSs as issued by IASB).
The accounting policies are unchanged from those disclosed in the
annual consolidated financial statements.
These Condensed Consolidated Financial Statements of SDX Energy
Plc were approved by the board of directors on 28 September
2023.
b) Functional and presentation currency
The functional currency for each entity in the Group, and for
joint arrangements and associates, is the currency of the primary
economic environment in which that entity operates. Transactions
denominated in other currencies are converted to the functional
currency at the exchange rate ruling at the date of the
transaction. Monetary assets and liabilities denominated in foreign
currencies are retranslated at period-end exchange rates.
The Group's financial statements are presented in US dollars, as
that presentation currency most reliably reflects the business
performance of the Group as a whole. On consolidation, income
statement items for each entity are translated from the functional
currency into US dollars at average rates of exchange, where the
average is a reasonable approximation of rates prevailing on the
transaction date. Balance sheet items are translated into US
dollars at period-end exchange rates.
c) Use of estimates and judgments
The preparation of financial statements in conformity with IFRS
requires management to make judgments, estimates and assumptions
that affect the application of accounting policies and the reported
amounts of assets, liabilities, income, and expenses. Actual
results may differ from these estimates and affect the results
reported in these Condensed Consolidated Financial Statements.
Estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognised in the year
in which the estimates are revised and in any future years
affected.
Purchase price allocations, depletion, depreciation and
amortisation, and amounts used in impairment calculations are based
on estimates of crude oil and natural gas reserves. Reserve
estimates are based on engineering data, estimated future prices,
expected future rates of production, and the timing of future
capital expenditures, all of which are subject to many
uncertainties, interpretations, and judgements. The Company expects
that, over time, its reserve estimates will be revised upward or
downward, based on updated information such as the results of
future drilling, testing, and production levels, and may be
affected by changes in commodity prices.
In accounting for property, plant, and equipment during the
drilling of oil and gas wells, at period end it is necessary to
estimate the value of work done for any unbilled goods and services
provided by contractors.
The invoicing of produced crude oil, natural gas, and natural
gas liquids is, for non-operated concessions, performed by the
Company's joint venture partners. In certain concessions, the
operator relies on production and/or price information from other
third parties, which may not be consistently prepared and received
on a timely basis. In such instances, the Company may be required
to estimate production volumes and/or prices based on the most
robust available data.
Provisions recognised for decommissioning costs and related
accretion expense, derivative fair value calculations, fair value
of share-based payments expense, deferred tax provisions, and fair
values assigned to any identifiable assets and liabilities in
business combinations are also based on estimates. By their nature,
the estimates are subject to measurement uncertainty and the impact
on the Condensed Consolidated Financial Statements of future
periods could be material.
d) Going concern
Accounting standards in the UK require the directors to assess
the Group's ability to continue to operate as a going concern for
the foreseeable future, which covers a period of at least 12 months
from the date of approval of the Condensed Consolidated Financial
Statements.
The directors reviewed the cash flow projections prepared by
management for the period ending 31 December 2024. The capital
expenditure and operating costs used in these forecasted cash flows
are based on the board's best estimate of the operating budgets for
each of its assets and the corporate general and administrative
expenses.
The principal assumptions underlying the cash flow forecast and
the availability of finance to the Group are as follows:
-- The sale of the Company's Egypt assets for the amount of
consideration as agreed in the heads of terms signed in August
2023;
-- The maintenance of foreign currency exchange rates;
-- The Company expects to be able to settle significant
expenditure of $1.6 million incurred in relation two transactions,
the takeover by Tenaz Energy Corp and an acquisition, that were
terminated during 2022. Management has so far been successful in
discussing payment plans with several professional services firms
associated with these transactions;
-- The KSR-21 well drilled in Morocco during September 2023 will
produce a commercial quantity of gas for several months;
-- The Board expects to be able to settle significant capital
expenditure incurred in Morocco, including approximately $6.3
million for the drilling and connection of five wells during 2021
and 2022, and approximately $4.0 million for the drilling and
connection of one well during September 2023;
-- The Company expects to be able to meet its licence
commitments in Morocco and Egypt. This includes drilling wells that
will also ensure continued gas supply to three strategic customers
in Morocco. The Company may need to renegotiate its minimum work
programmes or licence commitments with the Moroccan and Egyptian
authorities on licences where the Group has capital commitments and
discretionary expenditures. Based on previous successful
renegotiations of work programmes, the directors believe that this
will likely be achieved, but it is not guaranteed;
-- The Company will repay the loan owed to the European Bank for
Reconstruction and Development ("EBRD") in full using the proceeds
from the sale of the Company's Egypt assets; and
-- The convertible loan that the Company entered into in July
2023 will be repaid by conversion into equity shares at maturity in
July 2024.
In reviewing the cash flow forecast and the principal
assumptions above, the Directors have also considered other
alternative measures available to the Group, including the
successful sale of assets, deferral of planned expenditure, the
reduction of overhead costs and an alternative method of raising
capital or debt. These alterative measures give the Directors a
reasonable expectation that the Group will have sufficient funds to
enable it to discharge its liabilities when they fall due.
However, there exists a material uncertainty that may cast
significant doubt over the ability of the Group to continue as a
going concern. As a result of various geopolitical factors, US
dollar transfers by the Central Bank of Egypt have been restricted
and the Company is not able to expatriate any funds currently
available in Egypt and there can be no guarantee of timing on when
funds will become available. These factors have also impacted the
Egyptian pound, as disclosed in Note 20, which has been devalued
several times since March 2022 and is currently trading at less
than half of its value compared with the US dollar since that date.
Whilst the company's receivables are not impacted by this
devaluation, the company's cash balance in country is fully exposed
to any additional currency fluctuations. In addition, the Board
believes it has options to raise external capital, the Board
however cannot guarantee the final quantum and timings of any
proposed financing. The Board would also note that there are no
guarantees that arrangements with creditors will remain
negotiable.
Notwithstanding the material uncertainty identified, the
Directors have concluded that the Group will have sufficient
resources to continue as a going concern for the period of
assessment, that is for a period of not less than 12 months from
the date of approval of the Condensed Consolidated financial
statements. Accordingly, the Condensed Consolidated financial
statements have been prepared in a going concern basis and do not
reflect any adjustments that would be necessary if this basis were
inappropriate.
3. New standards and interpretation not yet adopted
Certain new accounting standards and interpretations have been
published that are not mandatory for 30 June 2023 reporting periods
and have not been early adopted by the Group. None of these are
expected to have a material impact on the Group in the current or
future reporting periods and on foreseeable future
transactions.
4. Determination of fair values
Some of the Company's accounting policies and disclosures
require the determination of fair value; for both financial and
non-financial assets and liabilities. Fair values have been
determined for measurement and/or disclosure purposes based on the
methods set out below. When applicable, further information about
the assumptions made in determining fair values is disclosed in the
notes specific to that asset or liability.
The different levels of financial instrument valuation methods
have been defined as:
-- Level 1 fair value measurements are based on unadjusted quoted market prices.
-- Level 2 fair value measurements are based on valuation models
and techniques where the significant inputs are derived from quoted
indices.
-- Level 3 fair value measurements are based on unobservable information.
The carrying value of cash and cash equivalents, trade and other
receivables, trade and other payables, and loans and borrowings
included in the Condensed Consolidated balance sheet approximate to
their fair value because of the short-term nature of those
instruments. The fair value of employee stock options is measured
using Black-Scholes (non-market-based performance conditions) and
Monte Carlo (market-based performance conditions) option pricing
models. Measurement inputs include the share price on the
measurement date, exercise price of the instrument, expected
volatility based on the weighted average historic volatility
(adjusted for changes expected as the result of publicly available
information), the weighted average expected life of the instruments
based on historical experience and general option holder behaviour,
expected dividends, anticipated achievement of performance
conditions, and the risk-free interest rate.
5. Financial risk management
a) Credit risk
Credit risk is the risk of financial loss to the Company if a
customer, partner, or counterparty to a financial instrument fails
to meet its contractual obligations and arises principally from the
Company's receivables from joint venture partners, oil and natural
gas customers, and cash held with banks. The maximum exposure to
credit risk at the end of the period is as follows:
Carrying amount
$'000s 30 June 2023 31 December 2022
--------------------------------- ----------------------------------
Cash and bank balances 5,185 9,145
Restricted cash(1) 1,537 1,468
Cash and cash equivalents 6,722 10,613
----------------------------------- ----------------------------------
Trade and other receivables (2) 18,986 17,855
Total 25,708 28,468
----------------------------------- ----------------------------------
1) Cash collateral of US$1.5 million (2022: US$1.5 million)
which is held at the bank to cover bank guarantees for minimum work
commitments on the Company's Moroccan concessions. These guarantees
are subject to forfeiture in certain circumstances if the Company
does not fulfil its minimum work obligations.
2) Excludes prepayments of US$0.8 million which are included in
the Condensed Consolidated Balance Sheet as trade and other
receivables but which are not categorised as financial assets as
summarised above (2022: US$0.7 million)
Net debt
Carrying amount
$'000s 30 June 2023 31 December 2022
-------------------------------- -----------------------------------
Cash and cash equivalents 6,722 10,613
Borrowings (3,458) (5,500)
Accrued interest on borrowings (256) (158)
Net debt 3,008 4,955
---------------------------------- -----------------------------------
The Company's net debt position as at 30 June 2023 was $3.0
million (31 December 2022: $4.9 million), with cash balances of
$6.7 million (31 December 2022: $10.6 million) offset by drawn debt
of $3.5 million (31 December 2022: $5.5 million) and accrued
interest from the EBRD debt facility of $0.2 million (31 December
2022: $0.1 million). Subsequent to the period end, the Company paid
$1.0 million on 28 July 2023 and $0.2 million on 12 September 2023
to EBRD, reducing the principal from $3.5 million to $2.3
million.
Trade and other receivables
All the Company's operations are conducted in Egypt and Morocco.
The Company's exposure to credit risk is influenced mainly by the
individual characteristics of each counter party.
The Company applies the IFRS 9 simplified model for measuring
the expected credit losses, which uses a lifetime expected loss
allowance and are measured on the days past due criterion. Having
reviewed past payments, combined with the credit profile of its
existing trade debtors, to assess the potential for impairment, the
Company has concluded that this is insignificant because there has
been no history of default or disputes arising on invoiced amounts
since inception. As a result, the credit loss percentage is assumed
to be almost zero. No provision for doubtful accounts against these
sales has been recorded as at 30 June 2023 (31 December 2022: no
provision).
The maximum exposure to credit risk for loans and receivables at
the reporting date by type of customer was:
Carrying amount
30 June 31 December
$'000s 2023 2022
---------------------------------- -----------------------------------
Government of Egypt-controlled
corporations 9,816 8,448
Government of Morocco-controlled
corporations 5,147 5,371
Third-party gas customers 1,804 2,468
Joint venture partners 969 247
Other (1) 1,250 1,321
Total 18,986 17,855
------------------------------------
1) Excludes prepayments of US$0.8 million which are included in
the Condensed Consolidated Balance Sheet as trade and other
receivables but which are not categorised as financial assets as
summarised above (2022: US$0.7 million)
$9.8 million (31 December 2022: $8.4 million) of current
receivables relates to gas, condensate sales and production service
fees that are due from GPC and EGAS, both of which are Government
of Egypt-controlled corporations. The Company expects to collect
outstanding receivables of $7.3 million (31 December 2022: $4.8
million) for South Disouq, and $2.5 million (31 December 2022: $3.6
million) for West Gharib in the normal course of operations.
ONHYM, a Government of Morocco-controlled corporation, owes $5.1
million (31 December 2022: $5.4 million), which relates to its
outstanding share of well completion and connection costs, and
production costs. The Company has collected $0.2 million from ONHYM
during H1 2023, all of which relates to work performed in the
period before the Company acquired the Moroccan assets. The $5.1
million receivable balance as at 30 June 2023 (31 December 2022:
$5.4 million) includes $1.9 million (31 December 2022: $1.9
million) accrued receivable for ONHYM's share of historic well
completion and connection costs. Of the $5.1 million (31 December
2022: $5.4 million), $3.2 million (31 December 2022: $3.6 million)
is dated older than one year. To date, the Company has not suffered
cash losses for validly issued and accepted invoices and management
has determined that no further risk provision is required. A
payable of $5.0 million (31 December 2022: $4.8 million) to ONHYM
is also held on the Condensed Consolidated Balance Sheet.
Third-party gas customers in Morocco, owes $1.8 million (31
December 2022: $2.5 million) and is expected to be collected within
agreed credit terms.
Subsequent to 30 June 2023, the Company collected $5.6 million
of trade receivables from those outstanding at 30 June 2023; $3.1
million from EGAS, $0.7 million from GPC and $1.8 million from
third-party gas customers in Morocco.
Joint venture partners comprise partner current accounts of $1.0
million (31 December 2022: $0.2 million) from Energy Flow Global
Limited.
The other receivables of $1.3 million (31 December 2022: $1.3
million) consist of $1.1 million (31 December 2022: $1.1 million)
for Goods and Services Tax ("GST")/Value Added Tax ("VAT") In
London and Morocco and $0.2 million (31 December 2022: $0.2
million) for deposits.
$0.8 million (31 December 2022: $0.7 million) related to
prepayments, predominantly associated with South Disouq Central
Processing Facility ("CPF") spare parts and G&A expenditure, is
recorded in the Condensed Consolidated Balance Sheet.
As at 30 June 2023 and 31 December 2022, the Company's trade and
other receivables, other than prepayments, are aged as follows:
Carrying amount
$'000s 30 June 2023 31 December 2022
------------------------------ ----------------------------------
Current (less than 90 days) 9,048 9,884
Past due (more than 90 days) 9,938 7,971
Total 18,986 17,855
--------------------------------
Current trade and other receivables are unsecured and
non-interest-bearing. The balances that are past due are not
considered impaired.
6. Inventory
During the six months ended 30 June 2023, the inventory balance
increased by $0.2 million from $8.0 million as at 31 December 2022
to $8.2 million as at 30 June 2023 due to additions of materials to
be used in drilling campaigns in Morocco amounting to $0.5 million
and spare parts to be used in the South Disouq CPF amounting to
$0.1 million, which was partially offset by $0.1 million inventory
consumed in the Morocco to tie in DOB-1 well, and $0.3 million of
inventory consumed in South Disouq.
7. Property, plant and equipment
$'000s Oil and gas properties Other assets Total
--------------- -------------------------- ------------------------------------------ ------------------------------------
Cost:
Balance at 1
January 2022 191,405 1,813 193,218
------------------ -------------------------- ------------------------------------------ ------------------------------------
Additions 7,445 67 7,512
Transfer from
exploration
and evaluation
assets 6,774 - 6,774
Balance at 31
December 2022 205,624 1,880 207,504
------------------ -------------------------- ------------------------------------------ ------------------------------------
Additions 505 7 512
Asset part
disposal (5,143) - (5,143)
Balance at 30
June 2023 200,986 1,887 202,873
------------------ -------------------------- ------------------------------------------ ------------------------------------
Accumulated
depletion,
depreciation,
amortisation and
impairment:
Balance at 1
January 2022 (157,446) (1,179) (158,625)
------------------ -------------------------- ------------------------------------------ ------------------------------------
Depletion,
depreciation
and
amortisation
for the period (18,820) (44) (18,864)
Impairment
expense (4,810) - (4,810)
Balance at 31
December 2022 (181,076) (1,223) (182,299)
------------------ -------------------------- ------------------------------------------ ------------------------------------
Depletion,
depreciation
and
amortisation
for the period (5,975) (15) (5,990)
Balance at 30
June 2023 (187,051) (1,238) (188,289)
------------------ -------------------------- ------------------------------------------ ------------------------------------
NBV Property,
plant and
equipment as at
31 December
2022 24,548 657 25,205
----------------- -------------------------- ------------------------------------------ ------------------------------------
NBV Property,
plant and
equipment as at
30 June 2023 13,935 649 14,584
----------------- -------------------------- ------------------------------------------ ------------------------------------
During the six months ended 30 June 2023, additions of $0.5
million were predominantly related to costs incurred for ongoing
drilling campaign at West Gharib ($0.8 million), various
infrastructure works in Morocco ($0.2 million) and various capital
expenditure in South Disouq development project ($0.2 million).
This is partially offset by reducing the decommissioning provision
due to South Disouq asset part disposal ($0.7 million).
In February 2022, the Company sold 33% of the shares in Sea
Dragon Energy (Nile) B.V. to Energy Flow Global Limited ("EFGL")
for a consideration of US$5.5 million. From 1 February 2022, the
Company owned 67% of Sea Dragon Energy (Nile) B.V. with the
remaining 33% held by EFGL as a non-controlling interest
("NCI").
On 22 February 2023, at the request of EGAS, the Company and
EFGL entered into agreement with EFGL to repurchase the 33% of the
shares in Sea Dragon Energy (Nile) B.V. in exchange for deferred
consideration of $1.6 million plus an assignment of 33% of the
Company's 55% interest (equivalent to a direct 18.15% interest),
with a fair value of $5.5 million, in the South Disouq concession
to EFGL. From 22 February 2023, the Company owned 100% of Sea
Dragon Energy (Nile) B.V. and a 36.85% interest in the South Disouq
concession. The net book value of the assets sold was $5.1 million,
resulting in a $0.4 million gain recognised in the Condensed
Consolidated Statement of Comprehensive Income.
Depletion, depreciation and amortisation as disclosed per the
Condensed Consolidated Statement of Comprehensive Income also
include a charge of $0.3 million relating to the right-of-use
assets.
The difference between the $0.5 million addition disclosed above
and the $0.3 million cash outflow from property, plant, and
equipment expenditure in the Condensed Consolidated Statement of
Cash Flows is the result of normal timing differences of
recognising additions on an accruals basis and the timing of the
actual payment of capital expenditure creditors.
8. Exploration and evaluation assets
$'000s
------------------------------------------- ------------------------------------
Balance at 1 January 2022 21,611
------------------------------------------------ ------------------------------------
Additions 20,062
Transfer to property, plant and equipment (6,774)
Exploration and evaluation expense (23,281)
Balance at 31 December 2022 11,618
------------------------------------------------ ------------------------------------
Additions 2,358
Exploration and evaluation expense (349)
Balance at 30 June 2023 13,627
------------------------------------------------ ------------------------------------
During the six months ended 30 June 2023, E&E additions
totalled $2.4 million:
-- $1.6 million of E&E additions in Morocco relates to tie
in costs for DOB-1 ($0.7 million), BMK-1 testing and tie in costs
($0.6 million), and pre-drilling expenditures ($0.3 million) for
Morocco planned drilling campaign in H2 2023;
-- $0.4 million discovery bonus has been incurred in South
Disouq for Mohsen development concession; and
-- $0.4 million of E&E additions in West Gharib to drill Rabul SE-1.
For the six months ended 30 June 2023, exploration and
evaluation expenses in the Condensed Consolidated Statement of
Comprehensive Income stood at $0.4 million. This relates mainly
to:
-- a write off of $0.3 million for an unsuccessful exploration
well drilled in Rabul area in West Gharib; and
-- new business evaluation activities of $0.1 million
The difference between the $2.4 million disclosed above and the
$1.4 million cash outflow from exploration and evaluation
expenditure in the Condensed Consolidated Statement of Cash Flows
is the result of normal timing differences of recognising additions
on an accruals basis and the timing of the actual payment of
capital expenditure creditors.
9. Trade and other payables
$'000s 30 June 2023 31 December 2022
-------------------------------- ------------------------------------
Trade payables 12,784 13,257
Accruals 2,487 2,335
Joint venture partners 6,508 6,375
Deferred consideration 1,600 -
Other payables 901 820
Total trade and other payables 24,280 22,787
----------------------------------- ------------------------------------
Trade payables comprise billed services and goods. As at 30 June
2023, they consisted predominantly of royalties payable to the
Moroccan government, the Morocco 2022 drilling campaign and G&A
creditors, including transaction costs. The $0.5 million decrease
in trade payables as at 30 June 2023 from 31 December 2022 is
mainly the result of payment of costs associated with 2022 Moroccan
drilling campaign.
Accruals include amounts for products and services received that
have yet to be invoiced. The increase of $0.2 million from 31
December 2022 primarily reflects the value of work undertaken but
not yet billed as at 30 June 2023 for DOB-1 and BMK-1 in Morocco
($0.9 million) partially offset by the reversal of the 2021 bonus
that had been accrued for London team ($0.4 million) and invoices
received for the value of work undertaken that had not yet been
billed as at 31 December 2022 ($0.3 million).
Joint venture partners comprise partners current accounts of
$1.5 million in Egypt (2022: $1.6 million), $5.0 million from ONHYM
for the Morocco concessions (2022: $4.8 million). The joint venture
partner current accounts represent the net of monthly cash calls
paid less billings received.
In February 2022, the Company sold 33% of the shares in Sea
Dragon Energy (Nile) B.V. to Energy Flow Global Limited ("EFGL")
for a consideration of US$5.5 million. From 1 February 2022, the
Company owned 67% of Sea Dragon Energy (Nile) B.V. with the
remaining 33% held by EFGL as a non-controlling interest
("NCI").
On 22 February 2023, at the request of EGAS, the Company and
EFGL entered into agreement with EFGL to repurchase the 33% of the
shares in Sea Dragon Energy (Nile) B.V. in exchange for deferred
consideration of $1.6 million plus an assignment of 33% of the
Company's 55% interest (equivalent to a direct 18.15% interest),
with a fair value of $5.5 million, in the South Disouq concession
to EFGL. From 22 February 2023, the Company owned 100% of Sea
Dragon Energy (Nile) B.V. and a 36.85% interest in the South Disouq
concession.
Other payables of $0.9 million (2022: $0.8 million) comprise of
withholding tax payable from the Moroccan drilling and other sundry
creditors.
The difference between the $1.5 million increase in trade and
other payables in the Condensed Consolidated Balance Sheets as at
30 June 2023 and 31 December 2022 and the line item in the
Condensed Consolidated Statement of Cash Flows pertaining to the
decrease in trade and other payables of $2.1 million, is due to the
fact that trade and other payables in the Condensed Consolidated
Balance Sheets include capital expenditure items and the movement
in the Condensed Consolidated Statement of Cash Flows relates only
to the movement in operational expenditure and G&A
creditors.
10. Decommissioning liability
As at 30 June 2023, the total future undiscounted cash flows
relating to the decommissioning of Moroccan assets amounted to $4.8
million, to be incurred up to 2025, and the liability was
discounted using a nominal risk-free rate of 4%.
As at 30 June 2023, the total future undiscounted cash flows
relating to the decommissioning of the South Disouq assets amounted
to $1.7 million (SDX's share), to be incurred in 2024, and the
liability was discounted using a nominal risk-free rate of 11%.
No decommissioning liability is recorded for the Company's West
Gharib asset under the terms of the concession agreement.
The discounted value of the cash flows above amounts to $5.9
million as at 30 June 2023 and is shown below:
$'000s 30 June 2023 31 December 2022
------------------------------------- -------------------------------------
Decommissioning liability, beginning
of period 6,349 5,769
Recognition of provision - 844
Reduce provision due to asset part
disposal (1) (663) -
Changes in estimate - (448)
Utilisation of provision - (66)
Accretion 200 250
Decommissioning liability, end of
period 5,886 6,349
------------------------------------- -------------------------------------
Of which:
Current - -
Non-current 5,886 6,549
(1) The provision reduction is due to assigning 18.15% of the
Company interest in the South Disouq concession to EFGL.
No decommissioning activities are anticipated to take place over
the next 12 months and as at 30 June 2023 the entire liability is
classed as non-current.
11. Income tax
According to the terms of the Company's Egyptian Production
Sharing Contracts ("PSCs"), the corporate tax liability of the
joint venture partners is paid by the government-controlled
corporations ("Corporations") that participate in these PSCs, out
of the profit oil and gas attributable to the Corporations, and not
by the Company. For accounting purposes however, the corporate
taxes paid by the Corporations are treated as a benefit earned by
the Company, with the amount being "grossed up" and included in net
oil and gas revenues and the income tax expense of the Company.
The Company also has a Production Services Agreement ("PSA")
related to West Gharib, with the legal title held by SDX Energy
Egypt (Meseda) Ltd ("SDX West Gharib"), an Egyptian incorporated
entity. The Company is governed by the laws and tax regulations of
the Arab Republic of Egypt and pays corporate taxes annually on the
adjusted profit of SDX West Gharib.
The current income tax expense in the Condensed Consolidated
Statement of Comprehensive Income for the six months ended 30 June
2023 mainly relates to income tax on the South Disouq PSC ($1.7
million), the Company's PSA in West Gharib ($0.3 million) and a
social contribution tax in Morocco for the 2023 fiscal period ($0.1
million). The current income tax liability of $0.4 million in the
Condensed Consolidated Balance Sheet relates to the Company's PSA
in West Gharib.
The Company's Moroccan operations benefit from a 10-year
corporation tax holiday from first production, by concession. From
1 January 2022, profits generated from the Ksiri concession are
expected to be subject to corporation tax from 2022. However, the
Ksiri concision is expected to generate a tax loss in 2023 due to
the cost of KSR-20 well, which was drilled in 2022 and its taxable
depreciation will be charged over three years as per the tax
regulations in Morocco. The concession will only be required to
settle its minimum contribution tax which is due even in the
absence of profit and is calculated to be less than $0.1 million.
During the six months ended 30 June 2023, the Company has accounted
for a charge less than $0.1 million relating to a social
contribution tax levied, on an annual discretionary basis by the
Moroccan government, for the 2023 fiscal period. The levied rate,
on taxable profits, varies between 1.5% and 3.5% on an annual
basis. In accordance with the requirements of IAS 12 "Income taxes"
this charge has been classified as a corporate income tax in the
Condensed Consolidated Statement of Comprehensive Income.
12. Share-based compensation
During the six months ended 30 June 2023, the Company recognised
a total expense of $0.1 million (2022: $0.1 million) in the
Condensed Consolidated Statement of Comprehensive Income relating
to the amortisation of the fair value of options granted in earlier
periods over the vesting period. No options for ordinary shares in
the Company were issued, nor vested during the six months ended 30
June 2023. An amount of $0.4 million was released from the share
options reserve to retained earnings on the cancellation of options
granted in earlier periods.
13. Revenue, net of royalties
Six months ended 30 June
$'000s 2023 2022
--------------------------------------- ---------------------------------
West Gharib production service fee
revenues 3,467 5,672
South Disouq gas sales revenue 8,789 11,032
Royalties (2,963) (3,717)
------------------------------------------ --------------------------------- ---------------------------------
Net South Disouq gas revenue 5,826 7,315
Morocco gas sales revenue 4,901 7,517
Royalties (51) (146)
Net Morocco gas sales revenue 4,850 7,371
Net other products revenue 1,110 1,975
Total net revenue before tax 15,253 22,333
------------------------------------------
The production service fees relate to West Gharib, which is
governed by an Egyptian PSA.
The Company sells gas production from the South Disouq
concession to the Egyptian national gas company, EGAS, at a fixed
price of $2.65/ MMbtu (approximately $2.85/Mcf). The royalties are
those attributable to the government, taken in accordance with the
fiscal terms of the PSC. The net other products revenue relates to
condensate sales from this concession.
The Moroccan gas sales revenue is derived from a Petroleum
Agreement with the Moroccan state. Sales-based royalties become
payable when certain inception-to-date production thresholds are
reached, according to the terms of each exploitation concession.
Royalty payments are made directly to the Government of
Morocco.
14. General and administrative expenses
Six months ended 30 June
$'000s 2023 2022
-------------------------------------------- ----------------------------------- -----------------------------------
Wages and employee costs 2,311 2,482
Consultants - inc. PR/IR 158 190
Legal fees 103 173
Audit, tax and accounting services 289 338
Public company fees 349 279
Travel 122 84
Office expenses 247 315
IT expenses 82 167
Service recharges (1,157) (1,986)
-----------------------------------
Ongoing general and administrative expenses 2,504 2,042
Transaction costs 55 765
-----------------------------------
Total net G&A 2,559 2,807
--------------------------------------------
15. Loss per share
Six months ended 30
June
$'000s 2023 2022
----------------------------------- ------------------------------ ---------------------------------
Loss and total comprehensive
loss for the period (2,490) (761)
Weighted average amount of shares
- Basic 204,563 205,242
- Diluted 204,999 205,685
Per share amount
- Basic $(0.012) $(0.004)
- Diluted $(0.012) $(0.004)
------------------------------------ ------------------------------ ---------------------------------
Basic loss per share is calculated by dividing the loss
attributable to shareholders of the Company by the weighted average
number of ordinary shares in issue during the period. Diluted per
share information is calculated by adjusting the weighted average
number of ordinary shares outstanding to assume conversion of all
dilutive potential ordinary shares. No such dilution took place
during the six month ended 30 June 2023.
16. Segmental reporting
The Company's operations are managed on a geographic basis, by
country. The Company is engaged in one business of upstream oil and
gas exploration and production. The Executive Directors are the
Company's chief operating decision maker within the meaning of IFRS
8.
Six months ended 30 June 2023 Six months ended 30 June 2022
Egypt Morocco Unallocated (1) Total Egypt Morocco Unallocated (1) Total
$'000s
---------------- ---------------------------- ---------------------------- ---------------------------- -------------------------- ---------------------------- ----------------------------
Revenue 10,403 4,850 - 15,253 14,962 7,371 - 22,333
---------------- ---------------------------- ---------------------------- ---------------------------- -------------------------- ---------------------------- ----------------------------
Direct
operating
expense (3,958) (1,169) - (5,127) (3,439) (953) - (4,392)
Netback (pre
tax) (2) 6,445 3,681 - 10,126 11,523 6,418 - 17,941
----------------
General and
administrative
expenses (436) (687) (1,436) (2,559) (171) (705) (1,931) (2,807)
Stock-based
compensation - - (72) (72) - - (122) (122)
Share of profit
from joint
venture 268 - - 268 262 - - 262
Gain on sale of
asset 357 - - 357 - - - -
EBITDAX (2) 6,634 2,994 (1,508) 8,120 11,614 5,713 (2,053) 15,274
----------------
Exploration and
evaluation
expense (365) - (72) (437) - (76) (458) (534)
Depletion,
depreciation
and
amortisation (3,616) (2,533) (111) (6,260) (5,256) (4,992) (118) (10,366)
Impairment
expense - - - - - - - -
Bad debt
expense - - - -
Operating
income/(loss) 2,653 461 (1,691) 1,423 6,358 645 (2,629) 4,374
----------------
1) Unallocated expenditure, assets and liabilities include
amounts of a corporate nature and not specifically attributable to
a geographical segment.
2) Netback and EBITDAX are not recognised measures under IFRS.
The Company uses these measures to help evaluate its performance.
Please refer to the firnancial review for the definition of these
alternative performance measures.
The segment assets and liabilities as at 30 June 2023 and 31
December 2022 are as follows:
30 June 2023 31 December 2022
Unallocated Unallocated
Egypt Morocco (1) Total Egypt Morocco (1) Total
$'000s
------------- ------------------------ ------------------------- ------------------------ --------------------- ------------------------- ------------------------
Segment
assets 30,844 30,558 6,250 67,652 38,058 31,811 8,641 78,510
Segment
liabilities (5,843) (24,367) (5,552) (35,762) (6,885) (26,131) (4,086) (37,102)
------------- ------------------------ ------------------------- ------------------------ --------------------- ------------------------- ------------------------
1) Unallocated expenditure, assets and liabilities include
amounts of a corporate nature and not specifically attributable to
a geographical segment.
17. Leases
The Group has entered into various fixed-term leases, mainly for
properties and vehicles. During the six months ended 30 June 2023
the Group has renewed the office lease contract in Morocco.
a) Amounts recognised in the balance sheet
The analysis of the lease liability as at 30 June 2023 is as
follows:
$000s 30 June 2023 31 December 2022
------------------------- --------------------------------------------- --------------------------------------------
Current 529 441
Non-current 660 723
---------------------------------------------
Total lease liabilities 1,189 1,164
------------------------- --------------------------------------------
The right-of-use assets as at 30 June 2023 amounted to $1.1
million:
$000s 30 June 2023 31 December 2022
---------------- ---------------------------------------------- --------------------------------------------
Properties 1,039 1,010
Motor vehicles 96 137
---------------------------------------------- --------------------------------------------
Total 1,135 1,147
---------------- --------------------------------------------
b) Amounts recognised in the statement of profit or loss
The depreciation charge for the six months ended 30 June 2023
amounted to $0.3 million and is shown below by underlying class of
asset:
Depreciation charge Six months ended 30 June Depreciation charge Six months ended 30 June
$000s 2023 2022
----------------
Properties 227 189
Motor vehicles 42 6
Total 269 195
----------------
18. Commitments and contingencies
Pursuant to the concession and production service fee agreements
in Egypt and Morocco, the Company is required to perform certain
minimum exploration and development activities that include the
drilling of exploration and development wells. These obligations
have not been provided for in the Condensed Consolidated Financial
Statements.
In Morocco, across the four exploration permits SDX holds, the
commitments are for eight exploration wells, the acquisition of a
total of 150km2 of 3D seismic and the reprocessing of 150km of 2D
seismic specifically related to the Moulay Bouchta permit. All
commitments should be completed by September 2025 and the total
estimated cost of these commitments is $20.6 million. Local
management is currently in discussion to reallocate commitments
between concessions.
In South Disouq, the commitments are to drill two exploration
wells, with an assigned financial commitment of $5.0 million
(gross). After the HA-1X and MA-1X drilling cost incurred, the
remaining unmet commitment is $1.1 million (gross).
The Group operates in several countries and, accordingly, it is
subject to the various tax and legal regimes in the countries in
which it operates. From time to time, the Group is subject to a
review of its related tax filings and in connection with such
reviews, disputes can arise with the tax authorities over the
interpretation or application of certain rules to the Group's
business conducted within the country involved. If the Group is
unable to resolve any of these matters favourably, there may be an
adverse impact on the Group's financial performance, cash flows or
results of operations. This may also be the case for any legal
claims that the Group is required to defend. In the event that
management's estimate of the future resolution of these matters
changes, the Group will recognise the effects of the changes in its
Condensed Consolidated financial statements in the period that such
changes occur.
The Group has been awarded a 10-year extension to its West
Gharib Production Services Agreement in Egypt until 9 November
2031. The key remaining commitments related to this extension, in
which SDX has a 50% working interest, are as follows:
-- A commitment to drill three more development wells, or one
development well and one exploration well, the second option of
which has been completed during H1 2023;
-- The final price-driven bonus of $0.5 million (SDX share
$0.3m) which was settled in Q1 2023; and
-- The final payment of a deferred signature bonus of $0.3
million will be settled on 31 December 2023.
19. Interests in subsidiaries
In February 2022, the Company sold 33% of the shares in Sea
Dragon Energy (Nile) B.V. to Energy Flow Global Limited ("EFGL")
for a consideration of US$5.5 million. From 1 February 2022, the
Company owned 67% of Sea Dragon Energy (Nile) B.V. with the
remaining 33% held by EFGL as a non-controlling interest
("NCI").
On 22 February 2023, at the request of EGAS, the Company and
EFGL entered into agreement with EFGL to repurchase the 33% of the
shares in Sea Dragon Energy (Nile) B.V. in exchange for deferred
consideration of $1.6 million plus an assignment of 33% of the
Company's 55% interest (equivalent to a direct 18.15% interest),
with a fair value of $5.5 million, in the South Disouq concession
to EFGL. From 22 February 2023, the Company owned 100% of Sea
Dragon Energy (Nile) B.V. and a 36.85% interest in the South Disouq
concession.
Summarised Sea Dragon Energy (Nile) B.V.
balance
sheet
As at 30 June 2023 As at 31 December 2022
Current
assets - 9,941
Current
liabilities - 3,771
Current net
assets - 6,170
----------------------------------------------------------- ----------------------------------------------
Non-current
assets - 15,171
Non-current
liabilities - 2,378
Non-current
net assets - 12,793
----------------------------------------------------------- ----------------------------------------------
Net assets - 18,963
=========================================================== ==============================================
Accumulated
NCI - 6,258
----------------------------------------------------------- ----------------------------------------------
Summarised statement of comprehensive income Sea Dragon Energy (Nile) B.V.
Six months ended 30 June 2023
Revenue -
Results for the period -
Result allocated to NCI -
------------------------------------------------------- -----------------------------------------------------------
Summarised statement of cash flows Sea Dragon Energy (Nile) B.V.
For six months ended 30 June 2023
Cash flows from operating activities -
Cash flows from investing activities -
Cash flows from financing activities -
Change in cash and cash equivalents -
------------------------------------------------------- -----------------------------------------------------------
Effect of foreign exchange on cash and cash
equivalents -
Net impact on cash and cash equivalents -
======================================================= ===========================================================
20. Foreign exchange loss
In March 2022, Egypt devalued its currency, the Egyptian pound
("EGP"), in response to macroeconomic circumstances driven by
Russia's invasion of Ukraine. Shortly after this devaluation, the
EGP dropped to c.18.2 to the US dollar, after having traded at
c.15.7 EGP to the US dollar since November 2020. During the six
months ended 30 June 2023, Egypt further devalued its currency with
the EGP dropping to c.30.75 to the US dollar. The mechanism for
collecting receivables in Egypt is not impacted by this devaluation
as receivables are settled in US dollars, or the EGP equivalent, on
the date payment is made. Costs of the Egyptian operations
denominated in EGP are not impacted by the currency devaluation.
The $1.3 million foreign exchange loss for the six months ended 30
June 2023 (2022: $2.2 million) is mainly the result of the $0.9
million impact on the EGP cash balance (2022: $1.7 million).
21. Subsequent events
In July 2023, the Company entered into a convertible loan
agreement with Aleph Finance Ltd for up to $3.25 million (the
"Convertible Loan") of which an initial amount of $2 million was
drawn on 26 July 2023 and a further amount of $0.5 million was
drawn on 12 September 2023. The Convertible Loan is unsecured,
convertible at any time at the option of the individual lenders and
repayable 364 days after the initial drawdown of the Convertible
Loan is made. The conversion price is approximately 4.5 pence per
Ordinary Share (or, if lower, the lowest issue price for any
Ordinary Shares issued during the life of the Convertible Loan). If
conversion occurs within ten business days of maturity, the
conversion price is approximately 6.6 pence per Ordinary Share.
Interest of SOFR+15% on the Convertible Loan will be payable on a
quarterly basis with an option for payment in kind, upon mutual
agreement by the borrower and lenders.
The Company paid $1.0 million on 28 July 2023 and $0.2 million
on 12 September 2023 to EBRD, reducing the principal from $3.5
million to $2.3 million.
In August 2023, the Company entered into non-binding heads of
terms ("Heads of Terms") with a large multinational operator to
divest of all of its Egyptian assets. The Company expects to close
the transaction by year-end. Completion of the Disposal will be
subject to, among other conditions, the negotiation of final
transaction documentation and obtaining Egyptian government
approvals for the sale. The Heads of Terms are non-binding and,
therefore there can be no certainty that the Disposal will
complete.
In September 2023, the Company commenced drilling the Ksiri-21
("KSR-21") well in Sebou Central of the Gharb Basin, Morocco.
In September 2023, the Company entered into a non-binding heads
of terms with DIKA MOROCCO AFRICA, its largest offtaker, to prepay
for SDX's gas deliveries in Morocco. The initial terms of the
agreement envisage the draw down of approximately $2 million by the
end of September 2023. These funds are planned to be used towards
the drilling costs of the KSR-21 well.
For further information:
SDX Energy Plc
Daniel Gould, Managing Director
William McAvock, Chief Financial
Officer
Tel: +44 (0) 20 3219 5640
Shore Capital (Nominated Adviser and Broker)
Toby Gibbs/Iain Sexton
Tel: +44 (0) 20 7408 4090
InHouseIR (Investor and Media Relations)
Sarah Dees/Oliver Clark
Email: sdx@inhouseir.com
Tel: +44 (0) 78 8165 0813 / +44 (0) 20 3239 1669
Camarco (PR)
Billy Clegg/Owen Roberts/Violet Wilson
Tel: +44 (0) 20 3757 4980
Competent Persons Statement
In accordance with the AIM Rules for Companies, the technical
information contained in this announcement has been reviewed and
approved by Mr. Aaron LeBlanc, Head of Operations at SDX Energy
Plc. Mr. LeBlanc is a qualified person as defined in the London
Stock Exchange's Guidance Note for Mining and Oil and Gas Companies
and has the necessary professional and technical competencies to
conduct and review petroleum operations. Mr. LeBlanc has a Bachelor
of Science Degree in Geology from the University of Calgary and is
a professional member of the AAPG. Mr. LeBlanc has 21 years of oil
and gas industry technical, operational and leadership
experience.
About SDX
For further information, please see the Company's website at
www.sdxenergygroup.com or the Company's filed documents at
www.sedar.com .
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 developments and results at KSR-21 well and potential sale of
Egypt assets should 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 labour and services.
All timing given in this announcement, unless stated otherwise,
is indicative, and while the Company endeavours 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; the 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 refer to
the Principal Risks & Uncertainties section of SDX's Annual
Report for the year ended 31 December 2022, 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.
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 terms "Netback," and "EBITDAX"
which are not recognized measures under IFRS and may not be
comparable to similar measures presented by other issuers. The
Company uses these measures 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.
EBITDAX is a non-IFRS measure that represents earnings before
interest, tax, depreciation, amortization, exploration expense and
impairment. EBITDAX is calculated by taking operating income/(loss)
and adjusted for the add-back of depreciation and amortization,
exploration expense and impairment of property, plant, and
equipment (if applicable). EBITDAX is presented in order for the
users to understand the cash profitability of the Company, which
excludes the impact of costs attributable to exploration activity,
which tend to be one-off in nature, and the non-cash costs relating
to depreciation, amortization and impairments. EBITDAX may not be
comparable to similar measures used by other companies.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
IR EAANPADFDEAA
(END) Dow Jones Newswires
September 29, 2023 02:00 ET (06:00 GMT)
Sdx Energy (LSE:SDX)
Historical Stock Chart
Von Apr 2024 bis Mai 2024
Sdx Energy (LSE:SDX)
Historical Stock Chart
Von Mai 2023 bis Mai 2024