WTI $53.69 +56c, Brent $61.64 +55c, Diff -$7.95 -1c, NG $3.18 +8c
WTI fell 35 cents last week but Brent was worse, off $1.06, today is much weaker on global GDP worries led by the IMF. Venezuela is also causing grief, the clamour for change in the country increases daily and it may get worse before it gets better.
Sound announced this morning that the rig used for TE-10 has been demobilised and stacked on site, the location for TE-11 has been selected and ground works will commence after the TE-10 testing is complete. The company confirms that the FMI identified both the presence of fractures and potential additional thin embedded net pay. Rig-less testing is expected to start in early February and will mechanically stimulate the most prospective reservoir zones in a series of production flow tests which is expected to take at least thirty days. The company suggests that a stimulated flow rate of 1.5-2 MMscfd is likely to be commercial especially if tied back to TE-5, and add ‘this commerciality threshold would be materially lower if the stratigraphic upside materialises as the TE-10 development would, in that case, be a standalone development’.
There is also good news from TE-5 which is ‘making good progress’ and that the consortium executing the FEED, (Enagas, Elecnor and Fomento) has completed the TGEP and is expected to have completed the CPF by the end of April 2019. All in all the news for Sound from Morocco continues to be reassuring and particularly from TE-5, where up until now the value has lain, to add potential from TE-10 is now perfectly feasible and indeed from this announcement more than a possibility.
A major operations update from SDX this morning as the company describes 2019 as a ‘landmark year’ with a number of important milestones that they intend to meet across the portfolio that will ‘deliver significant value for shareholders’.
In Morocco, the Gharb Centre 3D seismic has been processed and initial interpretation has been completed. The data quality is excellent and multiple leads and prospects have been identified. Accordingly, planning for a twelve well campaign has begun and drilling will commence late in Q3/early Q4 and complete in 1H 2020. The programme will include re-testing LNB-1 and LMS-1 in Lalla Mamouna and the rest will come from the Gharb Centre seismic work. It is expected that three of the twelve wells will be completed and connected in 2019 making the year’s capex a gross $10m with SDX shares $8m. Of this $8m, $6m is for wells and $2m for facilities and field capex. SDX is targeting gross production of 9-11 MMscfd of conventional gas sales in 2019.
In Egypt the company is unsurprisingly concentrating on South Disouq, the first half will see the completion of the construction of the Central Processing Facility, the 10 km export pipeline and tie-ins of the four existing producing wells. First gas is expected in mid 2019 with a gross production rate of 50-60 MMscfd with the gas being sold to the state at $2.85 Mcf. In the area prospect inventory is expected to increase after recent 3D seismic and the company will drill two further exploration wells in 2019 with multiple conventional gas prospects and a conventional oil prospect also identified.
Elsewhere in Egypt the company are continuing to work on the Meseda concession as well as NW Gemsa, production guidance for 2019 is 4,000-4,200 bopd for the former and 3,400-3,600 bopd for the latter. Meseda will see some drilling during the year but not at NW Gemsa which is a fully developed field.
SDX had $17m of cash at the year end, no debt and an undrawn $10m facility for Morocco from the EBRD so is very strongly placed financially, having received $4.5m of backdated Egyptian receivables in Q4 and expecting to see further reduction in its balance this year. Finally, the company is planning to relocate from Canada to the UK where a predominance of shareholders are to be found, the move is expected to be completed in Q2 2019 and ‘will result in meaningful annual savings in admin costs, management time and a more tax efficient corporate structure’. With 2019 expected to be a ‘landmark year’ according to the company it should see further benefits to shareholders after a pretty good 2018, the outlook for SDX is indeed very positive.
In brief as its almost dark as I have been visiting today, the FA Cup, despite a rather boring draw, put up some spirited displays over the weekend. Tonight’s draw will not include Spurs or Arsenal but will include Milwall, Doncaster Rovers, Pompey, Shrewsbury, Wimbledon and of course Andy, Bristol City…