SDX Energy Inc. provides operations update
Wednesday, Jul 05, 2017
SDX Energy Inc. (TSXV, AIM: SDX), the North Africa focused oil and gas company, is pleased to provide an operational update.


South Disouq (55% Operated working interest)

Following the successful drilling of the SD-1X exploration well and resulting natural gas discovery at South Disouq, a Resources Update was prepared on behalf of SDX by Gaffney, Cline & Associates (GCA), an independent global oil & gas consultancy.

The GCA Resources Update for South Disouq is an important step in the validation of SDX's understanding of the full potential of the field.  The results are in line with management's expectations. The Company also believes that the Gross Prospective Resources as reported above have now been significantly de-risked as a result of the SD-1X discovery, which was disclosed in its May 29, 2017 news release.

SDX believes that the 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.  The SD-1X discovery and its subsequent development allows SDX to begin unlocking the resource potential that it believes is contained within the South Disouq concession. Furthermore, given the encouraging results noted in the deeper oil prone Cretaceous horizon encountered in SD-1X, where a working petroleum system was encountered, the Company is planning to further test this horizon during the development program planned for the SD-1X discovery.

1. Gross volumes are unrisked, 100% working interest volumes and do not represent the contractor's actual Net Entitlement under the terms of the PSC that governs the asset. See table 1 in Appendix.

2. Aggregate of volumes four prospects and five Leads; aggregation performed by SDX management. See table 2 in Appendix.

3. For Contingent Resources, there is uncertainty that that it will be commercially viable to produce any portion of the resources. For Prospective Resources, there is no certainty that any portion of the resources will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of the resources.

SDX is also pleased to announce that it is currently in constructive discussions with the Egyptian authorities, regarding bringing the field into production by way of an early production system (EPS). The initial development at SD-1X will see the field being connected to the nearby Egyptian domestic gas distribution system allowing for both early cash flow and for subsequent wells and discoveries to be connected in short order.  The existing gas infrastructure within the concession area combined with the cooperative and supportive efforts of Egyptian authorities will allow SDX to bring this discovery into production in the shortest possible time frame.

North West Gemsa (50% working interest)

At North West Gemsa the workover program is set to commence in July.  This program will be focused on ESP installation and maintenance of both production and water injection wells, working towards ensuring that the field target rate of 5,000 boepd is maintained throughout the year.  This follows the recent technical review at North West Gemsa to determine how best to extend the economic field life through optimising field operations whilst continuing to focus on operating cost reductions.

Meseda (50% working interest)

At Meseda the fluid treating facility upgrade has now been completed.  This involved the installation of a new two- phase separator, which has doubled the gross treating capacity in the field.  Additionally, a tender exercise has been undertaken to select the preferred Electrical Submersible Pump ("ESPs") vendor to supply the pumps for the remaining workovers in Meseda. The fluid treating facility completion allows the workover campaign to resume with the resulting uplift in production envisaged in the coming months.

Morocco (75% working interest)

Significant progress continues to be made in preparing for the forthcoming drilling campaigns at both Sebou and Lalla Mimouna, which remain on track to commence in September of this year.   The campaign will include the drilling of seven wells, two of which will be exploration wells and the remaining five being development wells.  To that end, SDX has concluded its tendering exercise and selected XCD to provide a rig for this program.  XCD has previously drilled in Morocco and is very familiar with the area.  The mobilisation will begin within the next six weeks.  In addition, SDX has now secured all the long lead items necessary for the drilling campaign, locally at very competitive prices, from an operator that was exiting the country.  Finally, construction has now commenced on the seven identified locations, as well as several back-up locations, ensuring that upon arrival of the drilling rig there should be no delay in start-up. 

Paul Welch, CEO of SDX, commented:

"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.

"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.  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.

"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."

About SDX

SDX is an international oil and gas exploration, production and development company, headquartered in London, England, UK, with a principal focus on North Africa. In Egypt, SDX has a working interest in two producing assets (50% North West Gemsa & 50% Meseda) located onshore in the Eastern Desert, adjacent to the Gulf of Suez. It also has a 55% operated working interest in the South Disouq concession, located in the Nile Delta, where a gas discovery was made by the SD-1X well in 2017.  In Morocco, SDX has a 75% working interest in the Sebou concession situated in the Rharb Basin. These producing assets are characterised by exceptionally low operating costs making them particularly resilient in a low oil price environment. SDX's portfolio also includes high impact exploration opportunities in both Egypt and Morocco.

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