SDX Energy Inc (LON:SDX, CVE:SDX) has confirmed the size of the new South Disouq gas discovery, in line with its expectations, with an independent consultant assigning just over 47bn cubic feet of contingent resources.
A new resource update was provided by Gaffney, Cline & Associates (GCA), outlining gross contingent resources of 47.1bn cubic feet of gas and 2.29mln barrels of gas condensate, as well as a ‘best case’ prospective gas resource of 180bn cubic feet and 8.73mln barrels.
SDX described the new resource statement as “an important step” towards the validation of the full potential of its 55% owned South Disouq field.
It added that the prospective resources have been “significantly de-risked” by the SD-1X discovery, reported in May.
The company also noted that it is currently in “constructive discussions” with the Egyptian authorities about potentially bringing the new discovery online via an early production system, whereby an initial development would hook into a nearby domestic gas distribution system.
This would open up early cash flow and also allow subsequent wells to be connected in short order, the company added.
In terms of technical progress following the SD-1X discovery, the company noted that its understanding of the potential reserves and resources for South Disouq will continue to evolve over time as more data becomes available and further exploration activities are undertaken.
It added that it intends to carry out a further test of the deeper oil prone Cretaceous horizon, where a working petroleum system was confirmed by the SD-1X well. This additional test is expected to be incorporated into the future development programme at South Disouq.
"We are extremely upbeat on South Disouq and are pleased to be able to update the market with news of the initiation of discussions on the early production scheme, as well as the completion of the work on the CPR,” said chief executive Paul Welch.
“The accumulation of additional production data, combined with development drilling and additional exploration activity, will enable further independent assessment of the field's reserves and resources to be completed resulting in an additional increase in its value.”
Work-overs progress for Egypt fields
SDX also gave investors an update on its other portfolio assets.
At the 50% owned North West Gemsa field, also in Egypt, a new work over programme is due to get underway later this month. It will see the installation of new ESP well pumps, in addition to the maintenance, with the aim of ensuring that the field’s target rate of 5,000 boepd is achieved throughout the year.
At the Mesesa field, the company reports that an upgrade to a fluid treatment facility has been completed and a tender exercise has been carried out for proposed ESP pump installation, as part of ongoing work-over work.
The facility upgrade means the work-over programme can now resume, and as such an uplift in production is now envisaged in the coming months.
Countdown to new drilling in Morocco
Meanwhile in Morocco, the company reports “significant progress” in the preparation for upcoming drilling campaigns at the Sebou and Lalla Mimouna assets. Drilling is expected to start in September.
It is planned that seven new wells will be drilled, comprising two exploration wells and five development wells.
SDX has now selected a drill contractor for the programme, and rig mobilisation is anticipated within the next six weeks. Long lead items have been ordered and site preparation work has begun.
Unprecedented level of activity
Welch, in Wednesday’s statement, said: “The first half of 2017 has seen an unprecedented level of activity for SDX and today's announcement shows that material progress continues to be made across the current portfolio.”
He added: “We continue to progress our existing portfolio as aggressively as possible, whilst continuing to review opportunities for additional value accretive growth from new opportunities.
“With our existing team, predominantly based in North Africa; we have the internal resource and strong desire to maintain the momentum over the coming months. In addition, during Q3 we intend to update our shareholders on a start-up date for our EPS system in South Disouq."