SDX Energy extends production agreement at West Gharib for 10 years to 2031
(SDX ) has informed investors that 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.
In a morning statement, the oil and gas firm which operates in the Middle East and North Africa outlined the key terms of the extension. The Group holds a 50% interest in the West Gharib concession, located onshore in the Eastern Desert, adjacent to the Gulf of Suez.
This includes 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 then be drilled.
In addition, if Brent reaches US$60 for twelve consecutive months during the extension period, then two further development wells will also be drilled during the extension period.
The extension will include a payment of a deferred signature bonus of $2m with US$1m of this deferred bonus to be paid in monthly installments in the next 12 months and the remaining $1m to be paid in two installments of $0.5m on 31 December 2022 and 2023.
Shares in SDX Energy have traded within a tight range of 16p and 18p over the past month. The stock was trading 2.94% higher this morning at 17.75p following the announcement.
A further contingent bonus of up to $2m would be payable if Brent reaches $75, $80 and $85 for a period of six months, respectively, with a further US$0.5m payable for each time.
“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 2.2m barrels in our 31 December 2019 CPR, by 60%,” said CEO, Mark Reid.
“With a breakeven price of around $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,” Reid added.
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