SDX Energy Inc. Announces Trading Update, Preliminary Fourth Quarter and Summary Year-End 2015 Financial Results

LONDON, England, April 27, 2016 /CNW/ - SDX Energy Inc. ("SDX" or the "Company") (TSXV: SDX), an oil and gas exploration and production company with assets in Egypt and Cameroon, is pleased to provide a trading update and its preliminary fourth quarter and summary year-end 2015 financial results. All values are expressed in United States dollars' net to the Company unless otherwise stated. Full associated audited financial statements will be available on the website on April 29, 2016.

2015 Highlights:

Corporate and Financial and Highlights

  • Completed a business combination between Sea Dragon Energy Inc. ("Sea Dragon") and Madison PetroGas Ltd. ("Madison") on October 1, 2015 to create "SDX Energy Inc.";
  • 12 months to December 31, 2015 realized net revenues of US$17.6 million ("MM") and netback of US$11.5MM (2014: US$44.5MM and US$32.8MM, respectively);
  • 12 months to December 31, 2015 realized average oil price of US$41.55 per barrel ("bbl") (2014:US$82.34/bbl);
  • Exited 2015 with cash on hand of US$8.2MM and zero debt after repaying a US$1.65MM reserves based loan and a US$2.05MM debenture;
  • Invested US$6.4MM of capital expenditure into business;
  • 12 months to December 31, 2015, total comprehensive income of US$7.4MM compared to total comprehensive (loss) of US$(1.0)MM for the 12 months to December 31,2014;
  • In SDX's 2015 financial statements which, under International Financial Reporting Standards ("IFRS") are required to reflect 12 months financial results of Madison and three months financial results of Sea Dragon, total comprehensive income in 2015 will be US$9.4MM compared to US$7.9MM in 2014; and
  • Total comprehensive income for the 12 months to December 31, 2015 and under IFRS includes an US$18.3MM gain on the business combination and a US$6.8MM impairment charge.

Operational Highlights

  • Average daily oil sales in 2015 of 1,519 barrels of oil equivalent ("BOE") per day ("BOE/D");
  • Average daily natural gas and natural gas liquids production in 2015 of 152 BOE/D (to be invoiced in 2016);
  • As at December 31, 2015, pursuant to the Degolyer and MacNaughton Report (as defined below), proved and probable reserves net to SDX of 7.34MM BOE (North West Gemsa and Meseda) and gross mean prospective resources of 490 billion cubic feet ("BCF") of gas and 16.33MM barrels of oil and liquids (269.5 BCF and 8.98 MM barrels of oil and liquids net to SDX) at South Disouq;
  • In North West Gemsa, completed seven successful work-over wells and spudded Al Amir SE-23 development well, which was completed and tested at 4,080 BOE/D in February 2016;
  • In Meseda the MSD-6 well logged 146 feet of net pay and was brought on production at 330 BOE/D. Two further wells were drilled during the year and will be used for water injection needs and to delineate the northern boundary of the field;
  • Contractor appointed to carryout 300km2 3D seismic survey at South Disouq. Government approvals obtained and mobilisation commenced;
  • Well planning and surveys completed for Manatee-1 exploration well at West Bakassi in Cameroon; and
  • Completed technical review of prospectively at South Ramadan development concession.

Subsequent to year-end:

  • Al Amir SE-23 brought onto production and Al Amir SE-24 development well spud in February 2016, with results expected in late April/early May 2016;
  • South Disouq 300km2 3D seismic survey acquisition commenced March 2016; and
  • Manatee-1 spud on March 2, 2016 and on March 27, 2016 reached a total depth of 1,447 meters ("m") after intersecting 26m of gas bearing section of varying quality, with results currently being assessed.

2016 Guidance and Outlook:

  • Complete drilling of AASE-24 development well at North West Gemsa and carryout nine well workover program;
  • Progress 11 well workover programme, infill drilling and a waterflood programme at Meseda;
  • Complete South Disouq 300km2 3D seismic survey and drill carried exploration well before year end;
  • Assess result of Manatee-1 well in Cameroon and technical review at South Ramadan and decide on optimum way forward for these assets; and
  • Continue to work to reduce G&A post business combination.

Commenting, Paul Welch, President and CEO of SDX, said:

"SDX Energy has experienced a truly transformational year in 2015 with the Company experiencing significant positive benefits from the merger in early October 2015. The combination has created a stronger company with a stable financial base which provides resilience in these challenging markets.  We are fortunate to have a high margin production business, with significant growth potential, that has allowed us to remain profitable throughout the period.  However, we maintain a strict financial discipline to ensure we run the company and its assets as efficiently and effectively as possible.  We have already reported on several significant operational developments this year and that will be a running theme throughout the coming year as we execute our active work programme which will aim to increase production and discover new resources."

Advisory

Forward-looking Statements

Certain statements contained in this press release constitute "forward-looking statements" as such term is used in applicable Canadian and US securities laws. These statements relate to analyses and other information that are based upon forecasts of future results, estimates of amounts not yet determinable and assumptions of management. In particular, statements concerning the 2016 drilling and capital expenditure programs of the NW Gemsa, Meseda and South Disouq Concessions and the results referenced or implied herein should be viewed as forward-looking statements.

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 and should be viewed as "forward-looking statements".  All reserves and resources information contained herein as well as the net present value of such reserves and resources should be considered as forward looking statements. Such forward looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.  Such risks and other factors include, among others, costs and timing of exploration and production development, availability of capital to fund exploration and development and political, social and other risks inherent in carrying on business in Egypt and Cameroon.  There can be no assurance that such statements will prove to be accurate as actual results and future events could vary or differ materially from those anticipated in such statements.  Accordingly, readers should not place undue reliance on forward-looking statements contained in this news release.

Forward-looking statements are made based on management's beliefs, estimates and opinions on the date the statements are made and the Company undertakes no obligation to update forward-looking statements and if these beliefs, estimates and opinions or other circumstances should change, except as required by applicable law. Although SDX has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. Investors are cautioned that such forward-looking statements involve risks and uncertainties.  Actual results may differ materially from those currently anticipated.  SDX's Annual Information Form for the year ended December 31, 2015 to be published 30 April 2016 has a full description of the risks and uncertainties associated with the Company's business, including its exploration activities and these risk factors and uncertainties should be referred to and read in their entirety. The forward-looking statements contained herein are expressly qualified by this cautionary statement.

Reserves and Resources Data

The determination of oil and natural gas reserves involves the preparation of estimates that have an inherent degree of associated uncertainty. Categories of proved, probable and possible reserves have been established to reflect the level of these uncertainties and to provide an indication of the probability of recovery. The estimation and classification of reserves requires the application of professional judgment combined with geological and engineering knowledge to assess whether or not specific reserves classification criteria have been satisfied. Knowledge of concepts including uncertainty and risk, probability and statistics, and deterministic and probabilistic estimation methods is required to properly use and apply reserves definitions.

The recovery and reserve estimates of oil reserves provided herein are estimates only. Actual reserves may be greater than or less than the estimates provided herein.

Terms related to reserves classifications referred to herein are based on definitions and guidelines in the Canadian Oil and Gas Evaluation Handbook ("COGE Handbook") and are in accordance with National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities.

"Proved reserves" are those reserves that can be estimated with a high degree of certainty to be recoverable. It is likely that the actual remaining quantities recovered will exceed the estimated proved reserves.

"Probable reserves" are those additional reserves that are less certain to be recovered than proved reserves. It is equally likely that the actual remaining quantities recovered will be greater or less than the sum of the estimated proved plus probable reserves.

The qualitative certainty levels referred to in the definitions above are applicable to "individual reserves entities", which refers to the lowest level at which reserves calculations are performed, and to "reported reserves", which refers to the highest level sum of individual entity estimates for which reserves estimates are presented. Reported reserves should target the following levels of certainty under a specific set of economic conditions:

  • at least a 90 percent probability that the quantities actually recovered will equal or exceed the estimated proved reserves. This category of reserves can also be denoted as 1P; and
  • at least a 50 percent probability that the quantities actually recovered will equal or exceed the sum of the estimated proved plus probable reserves. This category of reserves can also be denoted as 2P.

Additional clarification of certainty levels associated with reserves estimates and the effect of aggregation is provided in the COGE Handbook. The estimates of reserves for individual properties may not reflect the same confidence level as estimates of reserves for all properties, due to the effects of aggregation.

Use of the term "boe" may be misleading, particularly if used in isolation. A "boe" conversion ratio of 6 Mcf: 1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Certain volumes provided in this news release represent a pro forma arithmetic sum of multiple estimates of proved plus probable reserves, which statistical principles indicate may be misleading as to volumes that may actually be recovered. Readers should give attention to the estimates of individual classes of reserves and appreciate the differing probabilities of recovery associated with each class as explained in the annual oil and gas disclosure filings of SDX (available on www.sedar.com) and the effects of arithmetic aggregation. Factors that could affect the accuracy of the reported pro forma aggregated reserves estimates include company level differences in evaluation effective dates, reservoir characteristics and pricing assumptions.

Reserves information in this press release are based on the independent reserves and resources evaluation of Degolyer and MacNaughton (the "Degolyer and MacNaughton Report"), dated December 31, 2015, evaluating SDX's crude oil, natural gas liquids and natural gas reserves and resources between January 1, 2015 and December 31, 2015.

Resources are petroleum quantities that originally existed on or within the earth's crust in naturally occurring accumulations, including discovered and undiscovered (recoverable and unrecoverable) plus quantities already produced. Total resources is equivalent to total petroleum initially-in-place.

"Contingent Resources" are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations using established technology or technology under development, but which are not currently considered to be commercially recoverable due to one or more contingencies.

"Prospective Resources" are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from undiscovered accumulations by application of future development projects. Prospective resources have both an associated chance of discovery and a chance of development.

Resources information in this press release is based on the Degolyer and MacNaughton Report. 

Non-IFRS and Additional-IFRS Measurements

Readers are cautioned that this press release contains certain Non-IFRS measurements, as defined below:

"Netbacks" represents SDX's petroleum and natural gas revenue, less royalties and production and operating expenses. Netbacks has been presented on an aggregate basis and not on a per BOE basis, as well.

"Capital expenditures" represents capital expenditures less any proceeds received upon the sale of capital assets.

"Cash on hand" represents cash and cash equivalents.

"Total comprehensive income" represents income for the year after all charges including foreign exchange movements.

The measures referenced above do not have any standardized meaning prescribed by IFRS and therefore may not be comparable to similar measures presented by other companies. Management believes that these terms are useful supplemental measures as they indicate key terms that SDX uses to measure and manage its business.  These measures have been described and presented in this press release in order to provide shareholders and potential investors with additional information regarding SDX's financial situation and its ability to generate funds to finance its operations.

NEITHER THE TSX VENTURE EXCHANGE NOR ITS REGULATION SERVICES PROVIDER (AS THAT TERM IS DEFINED IN THE POLICIES OF THE TSX VENTURE EXCHANGE) ACCEPTS RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THE RELEASE.

About SDX

SDX is an international exploration, production and development company, headquartered in London, England, UK, with a principal focus on Egypt. In Egypt, SDX has an interest in two production concessions: NW Gemsa and West Gharib both located in the Eastern desert. SDX's portfolio also consists of South Ramadan, a development asset in the Gulf of Suez; South Disouq, an exploration asset in the Nile Delta; and Bakassi West, an exploration block in Cameroon within the prolific Niger Delta Basin. For further information please see the website of the Company at www.sdxenergy.com or the Company's filed documents at www.sedar.com.

This news release does not constitute an offer to sell or the solicitation of an offer to buy any securities in the United States, in any province or territory of Canada or in any other jurisdiction.

SOURCE SDX Energy Inc.

For further information: SDX Energy Inc.: Paul Welch, President and Chief Executive Officer, Tel: +44 203 219 5640; Mark Reid, Chief Financial Officer and Director, Tel: +44 203 219 5640; Buchanan (PR): Ben Romney/Madeleine Seacombe, Tel: +44 207 466 5000


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