SDX Energy is a North Africa focused international E&P business with high margin producing assets and a transformational exploration upside. It engages in the exploration, development, and production of oil and gas primarily in the Arab Republic of Egypt and the Kingdom of Morocco. Net production: 3,237 boe/d, 2P reserves: 13.5 mmboe. The company is cash flow positive with no debt and is headquartered in London, the United Kingdom.
Are you optimistic about Egypt’s energy hub strategy?
We believe in Egypt’s long term capacity to reach its targeted development goals. The nation has newly discovered world class basins of natural gas. We already saw Egypt’s natural gas hub starting to take place in the ’90s when the LNG plants were built on the Mediterranean. Egypt quickly became the sixth largest exporter of natural gas worldwide. This historical experience will back its current targets to regain the title. The new natural gas reservoirs will allow Egypt to reclaim this spot on the global market. To further develop the sector Egypt has begun deregulating the transportation of gas and such actions will facilitate the development of the national economy. The natural gas export scheme is a perfect example of Egypt utilizing more of its pre-existing infrastructure within the country. This is a positive trend.
Regional countries such as Cyprus, Israel and to a lesser extent Lebanon have plans to export gas. Egypt can capitalize on this regional trend through its pre-existing infrastructure while utilizing its gas reserves to secure the position. We could soon see Egypt in the top ten or maybe top five natural gas exporters globally very soon. There are of course specific challenges as this is a worldwide competition. Egypt can also maximize that potential through its industrial sector which will create much more value than merely exporting it.
There are other opportunities in the oil sector for Egypt to monetize on underutilized infrastructure, especially in the Eastern Desert such as its ports and pipelines. The government has historically owned this middle segment. National consumption continues to grow, current oil discoveries and production has declined ever so slightly, making it unlikely Egypt can become an oil exporter. Nonetheless, that infrastructure can still be monetized to benefit national development.
How will SDX replicate its success moving forward?
We are starting to get attention. SDX is a new player with big plans to grow within Egypt’s developing Energy Hub.
SDX has a very successful drilling campaign in Egypt with three out of four wells being successful in 2018, in addition to a successful well in 2017, bringing our success rate to 80%. We have utilized our 3D Seismic Technology very effectively by capitalizing on our experience in Morocco. Especially in the inverting of seismic techniques. We are proving that by applying the right science, you can achieve excellent results. SDX will continue its current strategy in the hopes of replicating and building on these accomplishments in 2019.
We are starting a 3D campaign and should have new seismic data in hand which we can start examining by the end of January 2019. This will translate into new drilling opportunities in South Desouk. We expect to start a very exciting drilling program in Egypt opening four to six new wells throughout 2019. We will be doing the same in Morocco where success has been reached in seven out of nine wells.
SDX has had success in the Nile Delta. We have discovered gas onshore which will be economic. We have just signed a development lease with the government which will aim to produce 50 to 60 million standard cubic foot of gas a day, plus a little condensate. We are looking into signing a gas sales contract taking advantage of the gas markets ongoing deregulation, but that doesn’t have to be our long term vision. SDX has extensive experience in Morocco where we produce, transport and sell gas directly to customers. We have our own infrastructure, and we see replicating that success in Egypt as a viable route.
How is SDX working to build value for communities surrounding its projects?
As a public company, with a market cap of USD 150 million, we have clear initiatives to support nearby communities. After several internal assessments and discussions with the local governor, we will soon be starting programs near Tanta. We have built a town hall and renovated a medical facility which serves as a small hospital for the community. Soon we will be committing to purchasing much-needed equipment, such as X-rays so that the facility can offer correct treatments for local patients. In addition, SDX works to be environmentally sensitive, and we have been meeting with the Egyptian environmental authorities to ensure our alignment. We also purchase local crops from nearby farmers from the areas we operate in.
