SDX Energy – Circle Oil

Well, it looks like SDX Energy are going to get some additional acreage in Egypt, and new acreage in Morocco as shown below. It gets my vote for sure :-).

I also noticed Malcy mentioning that SDX Energy would be on this years bucket list – always a good sign – but missed so far by the market – even better for now as I accumulate.

“As this moment in time I would give the benefit of the doubt to SDX, a company that is very much on the short list for the new bucket list.” Malcy

The statement below was likely in response to Broker Man Dan’s comments on a potential placing – which scared the market, but has since recovered – another good sign.

SDX ENERGY INC

(“SDX” or the “Company”)

 

STATEMENT REGARDNG MEDIA SPECULATION

London – 11 January, 2017 – SDX notes the recent media speculation concerning a potential acquisition and material equity fundraising.

In line with its stated strategy of seeking value accretive opportunities to expand the asset base in the North Africa region, SDX is pleased to confirm that it has entered into non-binding heads of terms (“HoT”) with Circle Oil plc (“Circle Oil”) for the acquisition of Circle Oil’s Egyptian and Moroccan businesses (the “Acquisition”).  The HoT has a 30 day exclusivity period.

The Acquisition is subject, inter alia, to the completion of due diligence, documentation, compliance with all regulatory requirements and conclusion of an equity fundraising.  There can be no guarantee that the Acquisition or equity fundraising will proceed.

As previously announced, SDX is entering an exciting period for the Company as it moves into the drilling phase of the work programme at South Disouq in early 2017.  In addition, the well workover program at North West Gemsa continues, as does the redevelopment, waterflood program and facility capacity upgrade at Meseda. 

 

Further announcements will be made in due course as and when appropriate.

Commenting, Paul Welch, CEO, said:

“We have made clear our firm intentions to create shareholder value by growing SDX into a profitable mid-tier E&P company.   Circle’s assets present an attractive opportunity to add material production and reserves at an attractive price.  However, there is no certainty that this deal will be completed.  We remain excited about the near term activities from our existing portfolio, including the near term South Disouq exploration well, and look forward to keeping our shareholders appraised of all developments.”

Egypt – SDX Energy

A very interesting presentation from Paul Welch CEO of SDX energy.

I like the strategy and the solid base from which they plan to expand.


 

And an interesting opportunity in the acreage:

 

Egypt – SDX Energy

Remember Paul Welch the ex CEO of Chariot? Also Mark Reid the ex CFO of Chariot? Well SDX was launched on AIM in 2015 and they have a bigger board than Chariot – after Chariot got rid of several world class non-executives leaving Larry, and some guy from Jersey who looks after the interests of the other guy from South Africa :-), and also a Non Exec Chairman from the USA who to the best of my 4 year knowledge has never attended any AGM in person in the UK or Jersey. Prove me wrong if you can.



Looking at the SDX website SDX appear to have a very good strategy in place – high margin generation (cost of $10 bb and aiming for less than $5) which makes it a very interesting company from that perspective. The opportunity to improve their production capacity across all wells also looks interesting.  The ability to generate positive cash flow combined with some interesting free carry exploration plays is very different to the Chariot Elephant hunting  mantra. SDX also has a keen eye on consolidation of smaller oil companies into SDX. I have always liked consolidators! Take a look at the SDX recent presentation.

The SDX PR also looks to be in a higher league than that of Chariot’s which has always been a bone of contention with shareholders. Remember the shareholder communications (rushed) survey that Chariot did? Did it improve PR? Did we ever get any feedback? Just saying …

One thing that does surprise me is the low rate of working capital – especially cash  in the bank – given the ‘free cash flow’.

That aside, I for one am interested in this company. It’s one worth watching and possibly acting upon going through 2017. DYOR.