SDX Energy Plc (LON:SDX) is well positioned to become a key gas producer in Egypt, where demand is high.
That’s the view of SP Angel analyst Sam Wahab who, in a note, responded to a reserves upgrade earlier on Tuesday.
SDX announced a significant 35% increase in reserves at the South Disouq gas project in Egypt. The company owns 55% of South Disouq, which came online last year with ‘first gas’ achieved in November.
A new assessment of the field’s reserves by consultant Gaffney, Cline & Associates (GCA) shows gross proved plus probable (2P) reserves increasing to 86bn cubic feet of gas, up from a prior figure of 66bn cubic feet.
The upgrade is the result of new 3D seismic data reprocessing which has provided greater understanding of the reservoir structure and distribution.
SP Angel’s Sam Wahab said: “Another very positive announcement for SDX today, highlighting the considerable upside at South Disouq.
“The current stabilised production rate having the potential to achieve between US$13m - US$14m of net revenues per annum for the company, and further appraisal will likely boost this further.
“The performance to date of the CPF and the four wells has exceeded expectations and, with the commencement of the South Disouq drilling campaign in Q1 2020, SDX is well positioned to become a key gas producer into the high demand Egyptian gas market in our view.”
In this morning’s statement, SDX told investors that gas has been flowing at South Disouq since 7 November and all four of the field’s wells are performing as expected.
Production has measured around 50mln cubic feet per day since 10 December, which means the ramp-up is about three months ahead of expectations.
Gas produced from South Disouq is sold to Egyptian national gas company, EGAS, at a fixed price of US$2.85 per thousand cubic feet.
Looking to a new year of operations, SDX chief executive Mark Reid said: “We are now looking forward to the commencement of our South Disouq drilling campaign in February when we will be spudding the first of two wells targeting the same horizons encountered in our four discoveries to date.
“If successful, these wells have the potential to significantly increase our existing reserves and can be quickly tied into the South Disouq CPF.
“Depending on partnering discussions, a third well targeting deeper prospectivity in a potential new play fairway, may be drilled later in 2020."