High Margin Growth HIGH MARGIN GROWTH. Proactive Investors One2One Forum. D e c e m b e r O c t o b e r

Transcription

1 1 High Margin Growth D e c e m b e r 2018 HIGH MARGIN GROWTH Proactive Investors One2One Forum 1 9 O c t o b e r

2 Overview 2 AIM and TSX-V listed (TSXV: SDX/ AIM:SDX) Successful secondary listing & capital raise on AIM in 2016 (204.7M shares) C.200+% uplift since AIM listing Acquired Circle Oil s Egyptian and Moroccan Assets in Jan 17 Solid Production Base Cash flow positive to c.us$10/bbl Brent (at the corporate level) Reserves: Egypt Gross 2P Reserves: 24.6 MMBOE (31/12/17) Morocco Gross 2P Reserves: 6.48 BCF (31/12/17) Solid balance sheet as of 30 September 2018: US$33.2 MM of Working Capital (US$ 18.7 MM in Cash) - no debt Generating +/-$3.5MM of cash flow/month Credit facility with EBRD in Morocco for US$10MM (undrawn) Plans to increase corporate production by > 5,000 boped Entitlement production at 30/9/18 3,889 boepd Current working interest production 5,751 boepd S. Disouq start up production 50 MMscfd 8,333 boepd Well placed to capitalise on acquisition opportunities in N. Africa

3 Corporate and Financial Highlights Q3 and 9 Months 2018 Results Overview Three months ended September 30 Nine months ended September 30 3 US$ millions except per unit amounts Net Revenues Netback (1) Net realized average oil/service fees - US$/barrel Net realized average Morocco gas price - US$/mcf Netback US$/boe EBITDAX (1) (2) Exploration & eval n expense (0.2) (0.1) (5.5) (0.2) Depletion, depreciation and amortization (4.7) (4.6) (10.9) (13.1) (Loss)/gain on acquisition (0.2) 34.2 Total comprehensive income Net cash generated from operating activities Cash and cash equivalents Main components of comprehensive income of US$4.1 MM for the 9 months to 30/9/18 US$33.6 million netback/gross profit for the period US$(5.5) million non-cash E&E expense for 2 wells in Morocco, 1 in Egypt US$10.9 million of DD&A US$(3.8) million G&A US$(5.2) million Corporate Income Tax Netback of US$31.3 MM, up from US20.4MM for the same period last year (improved oil prices and higher gas prices in Morocco) Strong operating cash flow of US$22.7MM Cash position: 30/9/18, driven by strong netbacks combined with significantly increased investment activity Notes: (1) Refer to Non-IFRS Measures section of this release below for details of Netback and EBITDAX. (2) EBITDAX for Q and 2017 and nine months to September 30, 18 and 17 includes US$1.5 million and US$1.0 million and US$3.7 million and US$2.6 million respectively of non-cash revenue relating to the grossing up of Egyptian Corporate Tax on the North West Gemsa PSC which is paid by the Egyptian State on behalf of the Company.

4 Entitlement production for Q NW Gemsa 2,472 boepd Meseda 802 boepd Morocco 615 boepd Total 3,889 boepd Q Operational Highlights 4 Entitlement production at 23/11/18 NW Gemsa 2,496 boepd Gross 4,944 boepd (SDX: 50%) Meseda 998 boepd Gross 5,234 bopd (SDX: 50%) Morocco 662 boepd Gross 883 boepd (SDX: 75%) Total 4,156 boepd Working Int: 5,751 boepd NW Gemsa No drilling activity, workover programme completed 3D Seismic survey acquisition commenced Meseda Meseda 15 and 16 on production Rabul 2 well, re-drill complete 3 workovers completed South Disouq GSA terms and development lease area agreed, submitted for approval Tubulars arrived in Egypt, rights of way secured, land acquisition complete South Ramadan Well sidetracked, anticipate TD in December Morocco 3 new customer connections underway (GPC, Setaxam & Extralait) SDX Gharb ENERGY Center 3D survey (240km 2 ) acquisition completed

5 5 SDX 55% WI & Operator SDX 12.75% WI SDX 50% WI & Joint Operator SDX 50% WI

6 NORTH WEST GEMSA OVERVIEW 6 50% Working Interest 4,944 boepd Production (gross), November Mmboe 2P Reserves (gross), 31 December Mmboe Cumulative production to 31 December x Production Performance since acquisition in x Reserves 3 Producing Fields Al Amir SE, Geyad, Al Ola 83km 2 onshore concession 300km south of Cairo Partner: North Petroleum (50%, Operator) Acquired 40% equity interest from Circle Oil in Jan work-overs 2019 WORK PLANS/PROGRAM Target production of c.3,800 boepd

7 NORTH WEST GEMSA 7 HIGH MARGIN PRODUCING ASSET Waterflood development completed in 2 horizons Low operating costs ~ $US10/bbl Fully developed, no material future capex requirements Significantly cash generative going forward No future drilling, maintenance Capex only (workovers) Produces light (40 API) oil, sold at a 10% discount to Brent Attractive Netbacks: Netback vs. Brent Oil Price Brent: US$/BBL $30 $40 $50 $60 $65 $70 $75 Netback: US$/BBL $2.7 $6.9 $11.1 $15.3 $17.3 $19.4 $21.5

8 MESEDA 8 SIGNIFICANT DEVELOPMENT & EXPLORATION POTENTIAL 50% Working Interest Joint Operator 5,234 boepd Avg. production (gross), November Mmboe 2P Reserves (gross), 31 December Mmboe Cumulative production to 31 December 2017 June 2011 October 2017 November 2011 Meseda Discovery Rabul Discovery Production Start Up - Meseda 2019 WORK PLAN/PROGRAM 5 well work-over program (ESP changes) Drill 2 development locations (Rabul) 1 producer & 1 injector Water injection facility development (Rabul) Drill 1 infill producer (Meseda) Target Production of c. 4,600 bopd

9 MESEDA 9 Facility Upgrade Completed HIGH MARGIN PRODUCING ASSET Waterflood program implemented in Meseda Further injection facilities planned in 2019 Increase water treatment and injection capacity Water injection initiation in Rabul (2019) Produces heavy (17-20 API) oil, sold at a 30% discount to Brent Very Attractive Netback: Service contract in Meseda No Joint Venture Company Netback vs. Brent Oil Price Brent: US$/BBL $30 $40 $50 $60 $65 $70 $75 Netback: US$/BBL $12.0 $18.0 $24.0 $30.0 $33.0 $36.0 $39.0

10 Top Yusr Depth Map Post Rabul-4 and Top Yusr Depth Map OWC -4177ft TVDss is dashed blue Contour intervals are 50ft Rabul 6 (2019) Water Injector (2019)

11 EGYPT 11 55% Working Interest (Operator) 828 km 2 Concession area SOUTH DISOUQ 227 BCF & (P Mean) Gross Contingent and Prospective Resources 11 Mmbo 6.4 TCF & Rec. Volumes within Abu Madi Baltim Trend (IHS) 100 Mmbo Abu-Madi Baltim Trend 65 km s north of Cairo within prolific Abu Madi Baltim trend Located within existing oil and gas transport infrastructure Main gas, condensate and oil lines transect block Discovery made (April 2017) - 10 km s from main grid connection point 2019 WORK PLAN/PROGRAM Compete SD Central Facility H Production 50 MMscfd (8.3 kboepd) Complete 3D Seismic Acquisition (170 km 2 ) Drill 2 Exploration Wells - 1 Kafr El Sheikh (Existing 3D) - 1 Abu Madi (New 3D)

12 South Disouq Field Well Section 12 SD-1X SD-4X SD-3X Tested Flow Rates SD-1X: 25.8 SD-4X: 39.2 SD-3X: 16.6 Total: 81.6 MMscf/d

13 Ibn Yunus Discovery April IY-1X IY-1X Flowed 39.3 MMscf/d gross/ net Ø 28.5%, Sg 78%

14 Basal KES Prospectivity 14 KES Potential (Only) SHIKABALA SOBHI SALAH KAHRABA ELNE NY HADARI WARDA SAMIR HEGAZI MOHSEN Remaining Abu Madi Potential +/- 2.5 TCF Work in Progress 1) Re-assessing post well results - Determine what happened in Kelvin (Dry hole) 2) Inversion work being revisited - Proven ability to find reservoir - Not able to distinguish HC/wet sands reliably 3) Existing seismic and newly acquired seismic going to be reprocessed

15 South Disouq 3D Survey Outline 15 Planning to acquire 170 km 2 of new 3D Seismic in Q Original 3D Survey 300 km 2 New 3D Survey 170 km 2

16 16 MOROCCO: PRODUCING & EXPLORATION ASSETS

17 Exploration SDX 75% WI & Operator Exploration SDX 75% WI & Operator Exploration SDX 75% WI & Operator Production & Development SDX 75% WI & Operator

18 SDX MOROCCO SIMPLICITY MADE PROFITABLE 18 Very simple business model Explore, find (80%+ success rate), transport & sell (biogenic) gas (99.6% C1) No large central facility or treatment plant(s) Little to no treatment before delivery to customers Shallow targets, easily identifiable via 3D seismic High margin cash generative business Volumes are modest targeting 1BCF reservoirs Drilling costs are low (DHC s US$1.5MM) Opex below US$1.00/MCF No royalty or tax 10 year tax holiday Gas prices are high - US$10-12/MCF Each BCF of Gas is worth US$10-$12MM Significant growth potential Identified 50+Bcf of potential Focused on reserve growth Need 45 Bcf of gas to fill up pipeline with 5 -year fixed price gas contracts Acquired additional exploration acreage Acquiring 240 km 2 of new 3D Seismic 9 well program recently completed 7 successful Planning for second drilling campaign in Q2 19 underway Sebou Production & Development 75% WI & Operator Lalla Mimouna Nord Exploration 75% WI & Operator Lalla Mimouna Sud Exploration 75% WI & Operator Rharb Centre Exploration 75% WI & Operator

19 Moroccan Gas Sales MOROCCO 19 Currently selling 5.9 MMscfd (gross) at an average price of US$10.50/MCF High Netbacks (cus$9.72 mscf at current prices) Local gas price is based upon alternative supply which is imported compressed natural gas or bottled gas at US$18.00/MCF Gas is sold directly to local industrial users Local gas demand significantly outstrips supply Current contracts are 5 year fixed price agreements Future gas price contracts will range between $10 -$12/MCF based upon recent contract discussions and MOU s Peugeot car manufacturing plant connection completed Gas sales started along with test manufacturing (September 2018) Anticipate full start-up of factory in Q2/2019 Signed four additional GSA s Setexam, Extralait, GPC & Cittic Currently being connected to gas grid Gas sales commence: Setexam & Extralait- Nov 2019 GPC Dec 2018 Cittic Mar Exit gas rate 8 MMscfd

20 20 ROLL UP OPPORTUNITY

21 Remaining PV (10%) US$ (million)* EGYPT 21 9,000 THE CASE FOR CONSOLIDATION Company NPV10, NPV10/boe and net reserves 8,000 7,000 Eni = 500 mmboe Gas 6,000 5,000 BP Liquids Several large players focused on gas (primarily offshore) 4,000 Apache 3,000 2,000 1,000 DEA Shell Dana Gas Edison Sinopec Merlon Kuwait Energy Company Source: Wood Mackenzie *Discounted to 1st January 2016 Remaining PV/boe (US$/million)* Many (20+) small and medium sized companies that are focused on oil (primarily on shore) Too small to prosper in the current environment These are the targets

22 22 SUMMARY

23 Morocco Egypt Fully funded with active work programme 23 Anticipate adding 4,600 Boepd (net) in H Two active drilling programs (Egypt & Morocco) Field Activity NW Gemsa 7 Workovers st Quarter 2nd Quarter 3rd Quarter 4th Quarter Meseda Rabul - 6 Rabul - 7i MSD Workovers S. Disouq Morocco SD-Facility Exp - 1X Exp - 2X Exp - 3X 3D Seismic (170 Km 2 ) Exp - 1x Exp - 2x Exp - 3x Appraising and set to generate material revenues Incremental cash generating projects Exploration Development Appraisal Facilites Workover 3D Seismic Contingent

24 Net Asset 12.5% (US$ MM) SDX remains significantly undervalued 24 Currently trades at a 60% discount to RENAV 700 Net Asset 12.5% (US$MM) (Source: SDX Management); 1/1/2018 Val. Date 600 Oil $ Gas $ $95 $36 $33 Morocco S Disouq NW Gemsa Operated assets $36 Meseda Non Operated assets $36 Working Capital Notes 1 Oil Price: $65/bbl Real 2018, inflated 2% p.a. thereafter 2 Gas Prices: $2.65/mcf (Flat) for S Disouq and $10/mcf (Flat) for Morocco 3 S Disouq gas upside risked at 20% and oil upside at 24% $236 Core NAV -$3 S Ramadan $92 Morocco Upside Oil Gas $38 $41 S Disouq Risked Upside $167 $404 Current market cap: c.us$154m ( 0.50 / sh) Upside RENAV S Disouq Unrisked Upside $664 Unrisked NAV

25 CONCLUSIONS SDX - Strong Q3 and 9 Month 2018 results Netback/gross profit of $33.2MM increased by US$10.9MM (53%) over 2017 Cash generated from operations increased by $12.7MM (127%) over 2017 Current entitlement production up by 655 boepd (20%) to 3,889 boepd Current (23/11/18) working interest production currently: 5,751 boepd Well Funded US$33.2 MM of Working Capital (US$ 18.7 MM in Cash), no debt Generating +/-$3.5MM of cash flow/month Credit facility with EBRD in Morocco for US$10MM (undrawn) Looking Ahead NW Gemsa 7 workovers (maintenance) ,100 boepd Meseda 3 development wells Meseda & Rabul 4,650 boepd South Disouq Start-up of production facility 50 MMscfd (8.3kboepd) 2 exploration wells Complete Acquisition of 170 km 2 of 3D seismic MMscfd (8.3kboepd) Morocco 3 exploration wells Connect 3 additional new customers Full start-up of Peugeot plant April MMscfd Planning to increase net production by > 5,000 boepd in

26 26 High Margin Growth