SDX Energy Live Discussion

suicidal_tendencies 07 Feb 2020

SDX – Will they make an acquisition in 2020 or become an acquisition target? There really could be blood in the streets in the oil patch this year if this corona virus really does take hold. There will be bargains aplenty and SDX are extremely well positioned to take full advantage. Fixed-price gas contracts contributing the lions share of cash-flow and zero debt. They could do very well indeed out of what may come.

suicidal_tendencies 07 Feb 2020

SDX – Will they make an acquisition in 2020 or become an acquisition target? Indeed. Time will tell. A potential positive scenario for SDX acquiring something is that they could potentially do it with debt or at worst a combination of debt and equity thus limiting dilution. They should be able to get decent terms as they will have strong free cashflows going forward. They could even use the EBRD facility for Morocco CAPEX to free up even more free cash for an acquisition. SDX’s backers (Waha and Ingalls) basically are SDX. I believe SDX management is beholden to them and SDX has been managed extremely well from a financial and operating perspective. Whatever happens I expect that it will be very beneficial to these two main shareholders. The question is, will it benefit all shareholders?

Small_Holding 07 Feb 2020

SDX – Will they make an acquisition in 2020 or become an acquisition target? SDX making an acquisition It is now 3 years since SDX acquired Circle Oil. With the benefit of hindsight it was a shrewd move and the acquisition has proved to be accretive to the business. In 2018 SDX appeared to be acquiring assets from BP but eventually the acquisition fell through. Given the positive effect of the Circle Oil acquisition and the failed BP deal, it is fair to assume they are constantly looking for any potential targets. With guaranteed free cash flow of $30 to $32m a year for the next few years, are SDX going to spend that all on drilling and opex? I don’t think so. With market sentiment being so low and some company’s market cap at ridiculously low valuations, there will definitely be targets out there. I have made my thoughts clear, that I don’t want to see an acquisition with such a low SDX share price. I would fully expect SDX to raise cash through an equity placing as they did with Circle Oil and I believe that would allow the core institutional shareholders to take a bigger slice of the company at these low levels. Although I don’t want to see it, after 3 years of sitting and watching I think it would be naive to think SDX aren’t overdue in making an acquisition. SDX as a takeover target With a market cap that equates to only 2 years free cash flow, I believe it is fair to say SDX is currently cheap, especially with no debt and generating substantial revenue. The current drilling campaign has already been successful and given their historic success with the drill bit, I think it is fair to assume that the remaining high impact drilling will add to SDX reserves. Success with the drill bit increases reserves and the paper valuation of SDX. If the intrinsic value of SDX isn’t reflected in a higher share price then an already low valuation gets even more ridiculous. If SDX is already being eyed as a potential takeover target then with increased reserves the argument for attempting a takeover becomes even more compelling. For any company wanting to enter the Moroccan market, there can’t be a better company to acquire, given the SDX reserves, pipeline and established profitable customers. Some may think that our current shareholders, both institutional and retail would not sell, I would say at the moment cash is king and we don’t know if any shareholder would accept it until an offer comes in. If SDX are concerned about becoming a takeover target, then attempting to make an acquisition themselves could be seen as defensive measure as it would probably deter a potential buyer from making an offer. I would expect one or the other to happen this year, it is probably more likely that SDX will attempt to make an acquisition themselves but time will tell.

Small_Holding 05 Feb 2020

SDX - Minimal exposure to commodity prices Some investors still don’t seem to understand that SDX has very little exposure to commodity prices. In the Q&A section of the shares magazine presentation Mark Reid CEO said that SDX has “No exposure at all to commodity prices” I don’t think that is entirely true as West Gharib and North West Gemsa produce oil that is sold at a price linked to the Brent Oil Price. Screenshot_2020-02-05 Presentations - Corporate Presentation August 2018 Final pdf(2).png1150x404 131 KB 2020 cash flow of $30-$32m, made up of $11 to $12m South Disouq $5 to $6m West Gharib $0.5 to $1m North West Gemsa $15 to $17m Morocco $31.5m to $36m in total South Disouq gas is sold at a fixed price and the eight customers in Morocco are on long term fixed deal contracts. Taking the lowest figures that is $11m (SD) + $15m (M) = $26m of the $31.5m or 82.5% of generated revenue that is guaranteed on fixed long term contracts. Only the $5m + $0.5m = $5.5m (WG + NWG) or 17.5% of generated revenue that has a link to the Brent Oil Price. As our CEO pointed out this fixed revenue stream is attractive to some of our investors but I also think a lot of investors/potential investors still don’t get it. The fixed contracts are a double edged sword though because just as SDX’s revenue remains fairly constant when the oil/gas price crashes, it also remains constant if the oil/gas price soars. What it does do though is take away uncertainty. SDX, barring a major disaster, will generate revenue of $30m to $32m this year and for the next 5 years or so. To increase revenue they will have to make a discovery at South Disouq and connect it to the CPF or they have to get more customers in Morocco. A successful drilling campaign in Morocco increases reserves and extends the period they can supply their existing customers but it gives no increase to revenue unless they sign up more customers. At the moment they seem to be relying purely on the Atlantic Free Zone at Kenitra. It seems to be a massive site with numerous companies there but how many of those require gas, I don’t know.

suicidal_tendencies 03 Feb 2020

SDX - Where are the CEO interviews? Regardless of the fact NW Gemsa really adds next to no free cash flow, you can bet a headline of SDX losing x thousand barrels of production per year will still induce a drop (albeit possibly short lived) in the share price. If that does occur I will try to trade it.

Small_Holding 01 Feb 2020

SDX - Where are the CEO interviews? From the shares magazine presentation Currently producing around 7,000 boe/d of which South Disouq contributes 4,400 boe/d. 2020 cash flow of $30-$32m, made up of $11 to $12m South Disouq $5 to $6m West Gharib $0.5 to $1m North West Gemsa $15 to $17m Morocco $31.5m to $36m in total This shows that losing North West Gemsa is not as big a deal as I thought it was. 5 years of reserves now but Salah could add 2.5 years and Sobhi another 1.5 years If the Young well is drilled should cost $4 to $5m but they would be looking for a partner that would pay all the drilling costs and in return get a percentage of any discovery or future discoveries. With so much drilling activity it should be a period of fairly regular news. If SDX have success with the drill bit and market sentiment improves, it could still be a good year for SDX. Personally I feel a lot happier now the company has again got a public face and spokesperson.

Small_Holding 31 Jan 2020

SDX - Where are the CEO interviews? HALLELUJAH!! At last we get an investor presentation from SDX and we get to hear the CEO speak. The presentation was good and I thought he came across very well. He covered the business well and outlined the potential of the continuing exploration campaigns. I agree with you s/t regarding the wells in North Lalla Mimouna, he says that they will either extend the pipeline or compress gas near site. I think it will all depend on what they actually find, with the potential for gas, condensates and or oil it could be that decision is revisited. A shame about the questions, only time for two, the first was good and the second poor. MR had already covered the fact that our customers were on long fixed contracts. What wasn’t said and wasn’t asked, was if they continue with just the existing business model in Morocco, where are any new customers coming from. They have had those eight customers for a while now but no mention of where any additional customers are coming from. Having the gas to supply those eight customers for years to come is all well and good but surely we want the business to grow. MR may have ideas in that area but if he has they weren’t mentioned or nobody asked about it. A very good day though and I hope this is the first of many interviews/presentations that are given. With positive presentations like that and hopefully success with the drill bit we might finally get investors to take interest. It was good MR mentioned twice that the SDX market cap valuation is only twice their 2020 operational cash flow. Given the fundamentals here that is very cheap. I appreciate cash flow isn’t profit but when the drilling campaign ends, the opex falls significantly but the income stream remains constant, that is when SDX will have a lot of spare cash that they then have to decide what to do with.

suicidal_tendencies 31 Jan 2020

SDX - Where are the CEO interviews? I think this interview puts to bed the theories regarding tie in to the Mahgreb-Europe pipeline though. At the very end he’s asked a question by an audience member regarding what they would do with success in the North in Morocco. Mark Reid answers by saying “there are couple of options”, which are as follows; Extend the existing SDX owned pipeline Build some kind of CNG facility and compress the gas and truck it No mention of tying in to the ME export line. Of course, that doesn’t mean it is completely off the table.

suicidal_tendencies 31 Jan 2020

SDX - Where are the CEO interviews? Here’s your interview Small_Holding; [link]

suicidal_tendencies 29 Jan 2020

SDX - Edison updated broker note At least it didn’t go down.

Small_Holding 29 Jan 2020

SDX - Edison updated broker note Edison SDX Energy - FY20 guidance reflecting increased production | Edison SDX Energy provided new production guidance of 6,750–7,000boepd for 2020, representing an increase of c 70% on 2019 rates as the company expects to see the benefit of full year production from South Disouq. The field continues to deliver at a... SDX Energy provided new production guidance of 6,750–7,000boepd for 2020, representing an increase of c 70% on 2019 rates as the company expects to see the benefit of full year production from South Disouq. The field continues to deliver at a stabilised rate of c 50mmscfed. Meanwhile the Moroccan drilling campaign has added 3.3–4.4bcf of management estimated gross reserves from six successful wells, with the remaining wells including a number of higher risk/reward options. SDX will now focus on South Disouq’s exploration campaign, with up to three wells to be drilled in 2020 which, if successful, have the potential to increase reserves and be quickly tied into the South Disouq central processing facility (CPF). Our valuation moves from a RENAV of 50.3p/share to 53.9p/share (+7%), while our core NAV increases from 45.7p/share to 49.3p/share (+8%).

suicidal_tendencies 29 Jan 2020

SDX - RNS Successful drill result in Morocco Malcy’s clearly not getting gluttonous free lunches and drinks from SDX anymore.

Small_Holding 29 Jan 2020

SDX - RNS Successful drill result in Morocco Yesterday I said that because of market sentiment I was not expecting much reaction from the share price and that proved to be right. I know this is frustrating but make no mistake yesterday’s news was significant to SDX and the company’s value. From the January presentation “Wells in Lalla Mimouna, OYF-2 and BMK-1 are play opening and could transform the growth of SDX’s Moroccan business.” You only need to look at the map I reproduced above to see this is a completely new area of exploration and opens up a new area to develop. No complaints about SDX here either, they drilled a new area, got a better than expected result and reported it to the market immediately. I see Malcy just cut and pasted from the RNS without passing any comment again. Given that this success opens up a completely new area of growth, you would have expected a comment but nothing. I remember him saying if companies won’t talk to him he doesn’t cover them and I think that is the current situation with a media silent SDX.

suicidal_tendencies 28 Jan 2020

SDX - RNS Successful drill result in Morocco It’s my theory that SDX’s unstated purpose for the LNB and LMS wells is to tie them in to the Mahgreb-Europe pipeline. They’ve never mentioned it but just what else would they do with the volume of gas? I did a post a while back on it and Morocco’s desire to become some kind of LNG import/export hub.

Small_Holding 28 Jan 2020

SDX - RNS Successful drill result in Morocco Screenshot_2020-01-28 PowerPoint Presentation - SDX-Corporate-Presentation-November-2019 pdf.png548x654 451 KB The first five wells gave 2 to 2.5 bcf and the company said that would be sufficient to supply the existing customers for 30 to 36 months. OYF-2 has given a further 1.3 to 1.9 bcf and de-risked a further 0.5 to 1 bcf. That potentially doubles the covered supply to existing customers to 60 months With BFK-1 and another close to infrastucture well yet to drill potentially adding further they have sufficient reserves to last into the medium term. That means the last two well LNB-2 and LMS-2 in Lalla Mimouna North are a free throw of the dice. If successful these wells are not needed for the existing domestic customers and any gas could be linked direct to the relatively close Maghreb - Europe Gas Pipeline.