SDX Energy LON:SDX the AIM-listed oil and gas exploration and production company focussed on North Africa, published its final results to the end-December 2023 today (1st July).
It’s been a year of transformation for the London-headquartered O&G company, where it pivoted its emphasis away from Egypt towards Morocco, disposing of its West Gharib operations for around USD7.2m and is continuing negotiations to sell its South Disouq project.
At the same time, SDX expanded its Moroccan operations, renegotiating a gas sales agreement with one of its cornerstone customers, which allowed the exploration firm to move ahead with a summer drilling campaign.
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At the start of 3Q23 SDX completed the drilling of its KSR-21 well and at the beginning of this year the company tied-in KSR-21 ahead of commencing supply to its offtakers. In April SDX brought the well into production.
As soon as SDX brought KSR-21 online, it started drilling its BMK-2 well in Morocco, producing positive assays with strong gas shows, some 100x more than background readings. SDX drilled BMK-2 to over 1,400 metres
Cost cutting and a focus on profitable projects
The company also made progress on prepayment agreements, concluding three-month gas prepayment with client, CITIC Dicastal, a Chinese company, that will secure long-term prepayments for future Moroccan gas deliveries.
SDX did not only make operational changes, it also reorganised its management structure appointing a new chief financial officer, William McAvock and Daniel Gould as managing director/CEO, with Jay Bhattacherjee, moving from interim executive chairman, back to the role of non-executive chairman.
Revenue, net of royalties, declined year-on-year from USD13.7m (GBP10.8m) to USD8.8m. However, SDX also saw its comprehensive losses decline y-o-y from USD36.2m to USD21.2m with total basic and diluted losses per share fall from USD0.17/share to USD0.1/share.
The company said that 2023 was a year where it was focussed on cutting its costs and concentrating on profitable projects with the aim to ultimately fund its own operations sustainably. This included successful balance sheet optimisation replacing a cash-backed bank guarantee with a parent company guarantee and releasing USD1m of restricted cash.
$750,000 loan to pay for drill programme
The company secured a syndicated unsecured convertible loan note for up to USD3.25m from Aleph Finance a year ago, and subsequently drew-down USD2.5m over the year. Although the term of the loan note expired in April, SDX renegotiated the loan, allowing it access a further USD750,000, which it drew-down the same month to pay its service companies for the Moroccan drill programme and for general corporate expenses.
The company was founded as Sea Dragon Energy in Canada in 2006 and listed on the TSX two year later under the ‘SDX’ ticker. It started production in Egypt’s Meseda field in 2011 and ventured into Cameroon a year later. Merging with Madison PetroGas in 2015, Sea Dragon renamed itself SDX debuted on AIM the following year, and soon after exited Cameroon. Using new capital and money from the sale of its Cameroonian concessions the firm acquired Circle Oil’s assets in Egypt and Morocco, entering the Moroccan market for the first time and increasing its footprint in the country in 2019, before domiciling itself in the UK. Today the oil and gas company has six oil and gas concessions in North Africa. SDX says that it focuses on low-cost operations to provide a hedge from volatile energy prices.
SDX opened the week at 3.42p. A year ago it was trading 42% higher and has fallen 5% year-to-date with shares ranging between 3.4p and 6.3p over a 52-week period. SDX has a market capitalisation of GBP7.1m.
SDX Energy made significant strides in 2023
Despite a decline in revenue, SDX Energy made significant strides in 2023 by focusing on cost reduction, profitable projects, and exploration in Morocco. The successful drilling of the BMK-2 well with strong gas shows and securing prepayment agreements position the company for future growth. With a reorganized management team and continued focus on Morocco, SDX Energy is well-positioned to capitalize on its North African assets.
