SDX Energy Inc Second Quarter and Half Year 2016 Financial and Operating Results

Further progress with Egypt focused, high margin growth opportunity

LONDON, Aug. 24, 2016 /CNW/ - SDX Energy Inc. ("SDX" or the "Company") (TSXV, AIM: SDX) announces its 2016 Second Quarter and Half Year 2016 Financial and Operating Results (the "Quarter", "Q2 2016", "Half Year" or "6 months to June 30, 2016").

Second Quarter and Half Year 2016 Highlights:

Corporate and Financial

  • Completed successful US$11.0 million ("MM") placing raising c.US$10.2MM after costs (of which US$1.0MM was received in July 2016) and obtained dual listing on AIM market of London Stock Exchange plc ("AIM");
  • Key financial metrics for the 3 and 6 months ended June 30, 2016 and 2015 are:

Three months ended June 30

Six months ended June 30

US$ million except per unit amounts

2016

2015

2016

2015

Net Revenues

2.5

2.9

4.6

5.7

Netback

1.2

1.9

2.3

4.0

Net realized average oil price - US$/barrel

31.80

40.72

28.01

39.10

Net cash (used in)/generated from operating
activities

(1.0)

(4.0)

0.8

(2.1)

Total comprehensive (loss)/income

(25.2)

1.1

(26.0)

1.9

 

  • Comprehensive loss in 3 and 6 months ended June 30, 2016 due to write down of US$(24.7) MM in the Bakassi West, Cameroon exploration asset as a result of decision to withdraw from concession;
  • Invested US$6.5MM of capital expenditure into business;
  • As at June 30, 2016 cash on hand of US$6.9MM and zero debt.

 

Operational Highlights

  • During Q2 2016 average daily oil sales and production service fees equated to 1,170 barrels of oil per day ("BOP/D") and average daily natural gas and natural gas liquids production equated to 136 barrels of oil equivalent per day ("BOEP/D") (to be invoiced at a future date to optimize Concession terms);
  • During the 6 months to June 30, 2016 average daily oil sales and production service fees equated to 1,211 BOP/D and average daily natural gas and natural gas liquids production equated to 145 BOEP/D (to be invoiced at a future date to optimize Concession terms);
  • Completion of successful workover programs during the Quarter at North West Gemsa and Meseda resulted in exit production rate at June 30, 2016 of 1,550 BOEP/D;
  • In North West Gemsa, completed successful development well, Al Amir SE-24, which tested at 1,714 BOP/D with 3.06 million standard cubic feet per day ("MMSCFD") in May 2016. In addition, completed 5 workovers in the Al Amir SE and Geyad fields which focussed on wellbore maintenance;
  • In Meseda, completed an 8 well workover program which included tubing string replacements, well bore cleanouts and perforation adds. Completed strategic initiative focussed on development optimization and increasing production. Facilities optimization studies now underway;
  • Completed 3D seismic acquisition in South Disouq ahead of schedule and under budget. Seismic data processing is currently underway;
  • Completed technical review of prospectivity at South Ramadan development concession and an evaluation of project economics is currently underway;

 

Subsequent to period end:

  • SDX entered into a Deed of Assignment and Termination relating to Bakassi West, Cameroon. On July 31, 2016 all rights, interests, obligations and liabilities under the PSC were assigned to SoftRock Cameroon, the only member of the original partnership that has elected to remain in the concession; and
  • Completed fast-track processing cube for South Disouq 3D on July 19, 2016. Preliminary prospect locations are currently being evaluated.

 

2016 Guidance and Outlook:

  • Continue with well workover program at North West Gemsa;
  • Initiate redevelopment and waterflood program at Meseda;
  • Complete 3D seismic processing and interpretation for South Disouq. Conclude well location assessment and drill carried exploration well before year end;
  • Continue to minimise costs post business combination; and
  • Continue to explore opportunities to expand the asset base in Egypt and in the Middle East and North Africa ("MENA").

 

Paul Welch, President & CEO of SDX Energy, commented: 

"Having successfully raised new funds and completed our dual listing on AIM, we are now well placed to maximize the potential across our portfolio of Egyptian assets.   We are set to carry out an active work program on Meseda, which we expect to result in a material increase in our net production.  North West Gemsa is set to continue delivering high margin barrels and, concurrently, we are progressing our exciting exploration asset at South Disouq and look forward to completing the processing and interpretation of the 3D seismic survey ahead of a carried well later this year. 

We have a solid financial position which is underpinned by high-margin production that enables us to generate positive free cash flow down to US$15 oil.  This, combined with an active, and potentially transformational work program, gives us a high degree of confidence about the future."

Interim Consolidated Balance sheet (Unaudited)







As At

June 30, 2016

As At

December 31, 2015

 

(thousands of United States dollars)




Assets






Cash and cash equivalents

6,949

8,170

Trade and other receivables

8,480

6,678

Inventory

1,188

1,188

Current assets

16,617

16,036




Investments

2,818

2,106

Property, plant and equipment

17,731

18,401

Intangible exploration and evaluation assets

10,065

23,473

Non-current assets

30,614

43,980




Total Assets

47,231

60,016




Liabilities 






Trade and other payables

7,743

3,556

Current income taxes

642

928

Current liabilities

8,385

4,484




Deferred income taxes

286

286

Non-current liabilities

286

286




Total Liabilities

8,671

4,770




Equity






Share capital

39,315

30,148

Warrants

99

99

Contributed surplus

5,369

5,175

Other comprehensive loss

(1,154)

(1,154)

Retained Earnings

(5,069)

20,978

Equity

38,560

55,246




Equity and Liabilities

47,231

60,016

 

Interim Consolidated Statement of Comprehensive (Loss)/Income (Unaudited)










Three months ended June 30

Six months ended June 30

(thousands of United States dollars, except per share data)

2016

2015

2016

2015


Revenue, net of royalties

2,521

2,900

4,631

5,715

Revenue

2,521

2,900

4,631

5,715






Direct operating expense

1,290

1,004

2,289

1,675

Exploration and evaluation expense

24,883

-

24,883

-

Depletion, depreciation and amortization

845

436

1,662

887

Stock based compensation

100

146

194

323

Equity in income of associate

(365)

(357)

(712)

(637)

General and administrative expenses

912

639

1,772

1,173






Operating (Loss)/Income

(25,144)

1,032

(25,457)

2,294






Net finance expense/(income)

(267)

(227)

97

(436)






(Loss)/Income before income taxes

(24,877)

1,259

(25,554)

2,730






Current income tax expense

287

264

493

766

Deferred income tax (credit)/expense

-

(72)

-

(89)

Total Current and Deferred income tax expense

287

192

493

677






Net (Loss)/Income

(25,164)

1,067

(26,047)

2,053






Other comprehensive loss/(income)





Foreign exchange

-

(44)

-

165






Total comprehensive (loss)/income for the period

(25,164)

1,111

(26,047)

1,888






Net (loss)/income per share





Basic

$(0.455)

$0.019

$(0.560)

$0.036

Diluted

$(0.455)

$0.017

$(0.560)

$0.032

 

Interim Consolidated Statement of Changes In Equity (Unaudited)






Six months ended June 30

(thousands of United States dollars)

2016

2015




Share Capital



Balance, beginning of period

30,148

24,512

Private placement - secondary listing on the London Stock Exchange AIM

9,968

-

Share issue costs

(801)

-

Balance, end of period

39,315

24,512




Warrants



Balance, beginning of period

99

99

Balance, end of period

99

99




Contributed Surplus



Balance, beginning of period

5,175

4,414

Share based payments for the period

194

323

Balance, end of period

5,369

4,737




Accumulated Other Comprehensive Loss



Balance, beginning of period

(1,154)

(507)

Foreign currency translation adjustment for the period

-

(165)

Balance, end of period

(1,154)

(672)




Retained Earnings



Balance, beginning of period

20,978

10,931

Net (Loss)/Income for the period

(26,047)

2,053

Balance, end of period

(5,069)

12,984




Total Equity

38,560

41,660

 

Interim Consolidated Statement of Cash Flows (Unaudited)









Three months ended June 30

Six months ended June 30

(thousands of United States dollars)

2016

2015

2016

2015






Cash flows (used in)/from operating activities





Income before income taxes

(24,877)

1,259

(25,554)

2,730






Adjustments for:





Depletion, depreciation and amortization

845

436

1,662

887

Exploration expense

24,883

-

24,883

-

Finance costs

7

18

83

67

Stock-based compensation

100

146

194

323

Equity in income of associate

(365)

(357)

(712)

(637)

Operating cash flow before working capital movements

593

1,502

556

3,370

(Increase) / decrease in trade and other receivables

(2,762)

(928)

(1,785)

12

Increase / (decrease) in trade and other payables

1,596

(443)

2,449

(1,379)

Cash (used in)/generated from operating activities

(573)

131

1,220

2,003






Income taxes paid

(383)

(4,096)

(383)

(4,096)

Net cash (used in)/from operating activities

(956)

(3,965)

837

(2,093)






Cash flows used in investing activities:





Property, plant  and equipment expenditures

(15)

(821)

(15)

(959)

Exploration and evaluation expenditures

(10,019)

(784)

(10,937)

(959)

Dividends received

-

966

-

966

Net cash used in investing activities

(10,034)

(639)

(10,952)

(952)






Cash flows from/(used in) financing activities:





Repayment of debentures

-

(2,052)

-

(2,052)

Private Placement on London Stock Exchange AIM

9,167

-

9,167

-

Finance costs paid

(8)

(15)

(101)

(63)

Net cash from/(used in) financing activities

9,159

(2,067)

9,066

(2,115)






Change in cash and cash equivalents

(1,831)

(6,671)

(1,049)

(5,160)






Effect of foreign exchange on cash and cash equivalents

109

77

(172)

(313)






Cash and cash equivalents, beginning of period

8,671

19,056

8,170

17,935






Cash and cash equivalents, end of period

6,949

12,462

6,949

12,462

 

KEY FINANCIAL & OPERATING HIGHLIGHTS

Unaudited interim consolidated financial statements with Management's Discussion and Analysis for Q2 2016 are now available on the Company's website at www.sdxenergy.com and on SEDAR at www.sedar.com.

Unaudited Interim Financial
Statements


Three months ended June 30

Six months ended June 30

$000s except per unit amounts

Prior    
Quarter
(1)

2016

2015

2016

2015







FINANCIAL






Gross Revenues

2,789

3,384

2,900

6,173

5,715

Royalties

(679)

(863)

-

(1,542)

-

Net Revenues

2,110

2,521

2,900

4,631

5,715

Operating costs

(999)

(1,290)

(1,004)

(2,289)

(1,675)

Netback (2)

1,111

1,231

1,896

2,342

4,040







Total comprehensive income / (loss)

(883)

(25,164)

1,111

(26,047)

1,888


per share

(0.02)

(0.45)

0.02

(0.56)

0.04

Funds from operations

(37)

593

1,502

556

3,370


per share

(0.00)

0.01

0.03

0.01

0.06

Cash, end of period

8,671

6,949

12,462

6,949

12,462

Working capital (excl. cash)

(3,257)

1,283

1,172

1,283

1,172

Capital expenditures

5,819

6,475

1,605

12,294

1,918

Total assets

64,907

47,231

44,333

47,231

44,333

Shareholders' equity

54,457

38,560

41,660

38,560

41,660

Common shares outstanding (000's)

37,642

75,934

56,348

75,934

56,348

OPERATIONAL






Oil sales (bbl/d)

606

554

-

580

-

Production Service Fee (bbl/d)

646

616

783

631

807

Total boe/d

1,252

1,170

783

1,211

807







Brent Oil Price ($/bbl)

33.73

45.54

61.72

39.63

57.77

West Gharib Oil Price ($/bbl)

25.65

30.38

49.42

27.96

47.52

Net realized price ($/bbl)

24.46

31.80

40.72

28.01

39.10







Royalties ($/bbl)

5.96

8.11

-

7.00

-

Operating costs ($/bbl)

8.77

12.12

14.09

10.38

11.46

Netback ($/bbl)

9.73

11.57

26.63

10.63

27.64


(1) Denotes the three months ended March 31, 2016.


(2) Netback is a non-GAAP 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 netbacks 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.

 


Proforma Combined Business


Three months ended June 30

Six months ended June 30

$000s except per unit amounts

Prior    
Quarter (1)

2016

2015

2016

2015







FINANCIAL






Gross Revenues

2,789

3,384

6,659

6,173

13,839

Royalties

(679)

(863)

(1,976)

(1,542)

(3,722)

Net Revenues

2,110

2,521

4,683

4,631

10,117

Operating costs

(999)

(1,290)

(668)

(2,289)

(2,090)

Netback (2)

1,111

1,231

4,015

2,342

8,027







Total comprehensive income / (loss)

(883)

(25,164)

1,341

(26,047)

1,602


per share

(0.02)

(0.45)

0.02

(0.56)

0.03

Funds from operations

(37)

593

2,269

556

4,419


per share

(0.00)

0.01

0.04

0.01

0.08

Cash, end of period

8,671

6,949

12,957

6,949

12,957

Working capital (excl. cash)

(3,257)

1,283

3,515

1,283

3,515

Capital expenditures

5,819

6,475

1,875

12,294

2,376

Total assets

64,907

47,231

44,333

47,231

44,333

Shareholders' equity

54,457

38,560

41,660

38,560

41,660

Common shares outstanding (000's)

37,642

75,934

56,348

75,934

56,348

OPERATIONAL






Oil sales (bbl/d)

606

554

719

580

855

Production Service Fee (bbl/d)

646

616

783

631

807

Total boe/d

1,252

1,170

1,502

1,211

1,662







Brent Oil Price ($/bbl)

33.73

45.54

61.72

39.63

57.77

West Gharib Oil Price ($/bbl)

25.65

30.38

49.42

27.96

47.52

Net realized price ($/bbl)

24.46

31.80

48.73

28.01

45.98

Royalties ($/bbl)

5.96

8.11

14.46

7.00

12.37

Operating costs ($/bbl)

8.77

12.12

4.89

10.38

6.95

Netback ($/bbl)

9.73

11.57

29.38

10.63

26.66


(1) Denotes the three months ended March 31, 2016


(2) Netback is a non-GAAP 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 netbacks 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.

 

About SDX

SDX is an international oil and gas 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: North West Gemsa and West Gharib (Meseda) 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.  For further information, please see the website of the Company at www.sdxenergy.com or the Company's filed documents at www.sedar.com.

Advisory

Forward-Looking Statements

Certain statements contained in this press release constitute "forward-looking statements" 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 statements. In particular, statements concerning the completion of and anticipated results from the workover programs at Meseda and North West Gemsa; the exploration plans for the Company's asset at South Disouq, including the completion of the 3D seismic processing and interpretation, well location assessment and the drilling of a carried exploration well; and the expected results of the business combination between the Company and Madison PetroGas Ltd., which was completed on October 1, 2015, should be viewed as forward-looking statements.

The forward-looking statements contained in this document are 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 statements 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; the sufficiency of budgeted capital expenditures in carrying out planned activities; and the availability and cost of labour and services.

By their very nature, forward-looking statements are 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; failure to realize the anticipated benefits of the Transaction and to successfully integrate the Parties; 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 reference SDX's Annual Information Form for the year ended December 31, 2015 for a description of additional risks and uncertainties associated with SDX's business, including its exploration activities, which can be found on SDX's SEDAR profile at www.sedar.com.

The forward-looking statements contained in this press release are made as of the date hereof and SDX does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, except as required by applicable law. The forward-looking statements contained herein are expressly qualified by this cautionary statement.

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, Tel: +44 203 219 5640; Cantor Fitzgerald Europe (Nominated Adviser & Joint Broker), Sarah Wharry/Craig Francis, Tel: +44 207 7894 7000; FirstEnergy Capital LLP (Joint Broker), Jonathan Wright/David van Erp, Tel: +44 207 448 0200;Celicourt (PR), Mark Antelme/ Joanna Boon, Tel: +44 207 520 9260


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