INTERVIEW: UK's SDX looks to accelerate Egyptian onshore gas exploration

London — UK-listed upstream junior SDX Energy -- which is focused on mostly gas-producing assets in Egypt and Morocco -- plans to accelerate new drilling at its flagship South Disouq concession onshore Egypt, its CEO Mark Reid said Nov. 19.

In an interview, Reid said SDX was bringing forward plans to drill new wells at South Disouq having identified significant additional prospectivity.

"The most exciting well, without a doubt, for next year is a well we're drilling at South Disouq called Hanut, which is targeting 139 Bcf of P50 prospective resources," Reid said.

SDX -- which started production at South Disouq in November last year -- identified the Hanut prospect over the summer after re-assessing data from other wells at the block.

Reid said Hanut was similar to the Sobhi discovery made in April, "albeit quite a bit bigger."

"As a result, the right thing to do is to accelerate work given its size and put it into drilling for next year," he said.

"If the well is successful, it doubles our reserve base with one drill," he said.

SDX said earlier Nov. 19 that gross production from South Disouq averaged 49 MMcf/d (1.5 million cu m/d) of dry gas and 467 b/d of condensate in the first nine months of the year.

That equates to 4,710 boe/d net to SDX.

The company's total production in the first half, including other assets in Egypt and its gas output in Morocco, averaged 6,646 boe/d, up 90% year on year.

The Sobhi well will be brought online during Q1, and is set to boost SDX's production further, not least because it is 100% owned by the company.

"[Sobhi] will come on at 10-12 MMcf/d, but probably more importantly for us we have 100% entitlement to the gas in the Sobhi well, so incrementally the revenues from South Disouq will be more valuable to us," Reid said.

Growth opportunities

As well as looking for more gas at South Disouq, Reid said SDX had been encouraged to expand in Egypt.

"We've stabilized our business, we're now viewed as a safe pair of hands. And it's entirely within our strategy to grow the business organically and inorganically," he said.

"There is a real desire for us to grow the business -- Egypt has a very deep and broad M&A market and we're looking at it," he said.

Reid said SDX was fully focused on onshore developments having announced Nov. 19 that it had agreed to the disposal of its non-core 12.75% working interest in the Egyptian South Ramadan concession offshore in the Gulf of Suez.

"We like onshore," he said, adding that Egypt and Morocco remained the company's focus for possible expansion.

"It's easier to grow inorganically in countries where you already have a platform," he said.

He ruled out any entry into Libya or Algeria, pointing to geopolitical concerns in the former and SDX's relative size as an obstacle to investing in Algeria.

However, Reid said Tunisia could be an option in the future.

"We've communicated in the past that Tunisia is a country we look at regularly for opportunities," he said.

"It doesn't have the depth of asset turnover and M&A opportunities that Egypt has, but Tunisia would be a country that would interest us if we saw the right type of opportunity."

Morocco testing

SDX in March also made a new gas discovery in Morocco in a new, yet-to-be commercialized block at Lalla Mimouna, but the company's plans to test the well were frustrated by the Moroccan government introducing travel restrictions due to the coronavirus pandemic.

Reid said Morocco was beginning to adapt to the pandemic to keep its economy running.

"We are cautiously optimistic that we can bring people in to test the well in the spring of 2021," he said.

Reid added that its gas buyers in Morocco had now returned to pre-pandemic levels of gas consumption having been shut in during the spring lockdowns.

SDX sells gas under five- and 10-year fixed priced contracts to customers that include Peugeot, Extralait and GPC Kenitra.