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 MONTHS ENDED 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 115km2 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 km2), Ibn Yunus (24 km2), and Ibn Yunus North (32 km2), 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 41km2.

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 km2 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 18o API oil from the high-quality Miocene-aged Asl sands of the Rudeis formation. The Rabul field produces 16o 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 km2 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 km2 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 km2 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 km2 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 km2 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

 

($'000s)






Note

As at

30 June 2023

As at

31 December 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

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

$'000s



30 June 2023

31 December 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

 

Egypt

Morocco

Unallocated (1)

Total

 

Egypt

Morocco

Unallocated (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:

$000s

Depreciation charge Six months ended 30 June 2023

Depreciation charge Six months ended 30 June 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 balance sheet

 

Sea Dragon Energy (Nile) B.V.

 


 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. 

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