[Egypt] SDX Energy extends West Gharib PSA for ten years to 2031
SDX Energy, the MENA-focused oil and gas company, announced it has received final approval from the Egyptian authorities to extend the Production Services Agreements governing its producing Meseda and Rabul oil fields in its West Gharib concession in Egypt until 9 November 2031.
Mark Reid, CEO of SDX, commented: "We are very pleased to have secured this ten-year extension to the Production Services Agreement which we estimate increases SDX's share of reserves in our core West Gharib oil asset, certified at 2.2 million barrels in our 31 December 2019 CPR, by 60%. With a breakeven price of approximately US$20 Brent and to take advantage of the current strong oil price, we plan to commence in Q2 of this year, a drilling programme of up to twelve wells over the next three years with the goal of growing gross production back to around 3,000bbl/d. This drilling programme is in line with the capex guidance provided to the Market in our 26th January 2021 update. We would like to thank our partners The General Petroleum Company, a wholly owned subsidiary of the Egyptian General Petroleum Corporation, and Dublin Petroleum Limited for their valuable co-operation in agreeing this extension."
The key terms of the extension, in which SDX has a 50% working interest, are: A commitment, irrespective of Brent price, to drill six development wells by 31 December 2022 and one water injection well; If Brent reaches $55 for twelve consecutive months during the extension period, four further development wells will be drilled during the extension period; If Brent reaches $60 for twelve consecutive months during the extension period, two further development wells will be drilled during the extension period; Payment of a deferred signature bonus of $2.0 million (SDX share $1.0 million). $1.0 million of this deferred bonus will be paid in monthly installments in the next 12 months and the remaining $1.0 million will be paid in two installments of $0.5 million each, on 31 December 2022 and 31 December 2023; and A further contingent bonus of up to $2.0 million (SDX share $1.0 million) would be payable if Brent reaches the following price points;
- $75 for a period of six months - a further $0.5 million is payable
- $80 for a period of six months - a further $0.5 million is payable
- $85 for a period of six months - a further $1.0 million is payable
In Egypt, SDX has a working interest in two producing assets: a 55% operated interest in the South Disouq gas field in the Nile Delta and a 50% non-operated interest in the West Gharib concession, which is located onshore in the Eastern Desert, adjacent to the Gulf of Suez. In Morocco, SDX has a 75% working interest in five development/production concessions, all situated in the Gharb Basin.
The producing assets in Morocco are characterised by attractive gas prices and exceptionally low operating costs. SDX has a strong weighting of fixed price gas assets in its portfolio with low operating costs and attractive margins throughout, providing resilience in a low commodity price environment. SDX's portfolio also includes high impact exploration opportunities in both Egypt and Morocco.