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In an enviable position in the sector

SDX Energy 21 December 2020 Update
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SDX Energy

In an enviable position in the sector

Capital markets day

Oil & gas

21 December 2020

Price

18.0p

Market cap

£37m

US$1.27/£

Net cash ($m) at 30 September 2020

9.2

Shares in issue

205.4m

Free float

83%

Code

SDX

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

13.1

11.3

(23.3)

Rel (local)

10.6

1.2

(13.0)

52-week high/low

27.0p

11.5p

Business description

SDX Energy is a North African E&P listed in London. SDX produces oil and gas in Egypt and gas in Morocco.

Next events

LMS-2 well test

Q221

Drill Ibn Yunus-2

Q221

Drill Hanut

H221

Morocco drill campaign

H221

Analysts

Carlos Gomes

+44(0)20 3077 5700

Elaine Reynolds

+44(0)20 3077 5713

SDX Energy is a research client of Edison Investment Research Limited

At its recent capital markets day, SDX Energy reiterated 2020 production guidance and highlighted its strong cash generation, with c 90% of post-tax operating cash flows derived from fixed-price gas contracts. Management presented its 2021/22 plan of activities, targeting three wells in Egypt with potential to add 179bcf of recoverable reserves from a 233bcf exploration portfolio under assessment, and at least four exploration wells in Morocco. With increasing FCF, capital is likely to be directed to expansion of reserves but, absent this, offers the alternative option of returning capital to shareholders. Our mid-case RENAV remains in line with our last valuation at 45.0p/share.

Year-end

Revenue
($m)

PBT
($m)

Operating cash flow ($m)

Net cash ($m)

Capex
($m)

Production
(kboed)

12/18

53.7

7.1

36.2

17.3

(44.8)

3.6

12/19

53.2

(12.3)

25.1

11.1

(31.3)

0.0

12/20e

42.6

10.0

29.7

16.6

(26.2)

5.8

12/21e

43.5

13.5

31.5

25.8*

(23.1)

6.4

Note: * Accounts for the wells to be drilled and connected in Morocco but does not account for the exploration wells to be drilled at South Disouq given these are contingent on final approval for the extension of the exploration licence.

Hanut resource could extend production by five years

In the recent update on its operations and financial position, SDX’s focus was on its cash-generative fields and prospectivity around these assets. SDX highlighted Hanut, a prospect that lies 4.5km south-east of the South Disouq field. Like Ibn Yunus and Sobhi, Hanut is a basal KES deposit defined by high-amplitude seismic response, which is a good indicator of gas-filled sands in South Disouq. SDX estimates that Hanut has 139bcf of prospective recoverable resource and plans to drill the prospect in late Q221 or early Q321, once ministerial approval is obtained.

Excess cash provides optionality and flexibility

With a healthy balance sheet, we expect SDX to direct its FCF to exploration drilling and/or acquisitions. However, its healthy balance sheet and the nature of its business also provides the opportunity to return capital to shareholders. In this note, we test SDX’s ability to distribute dividends. We estimate unrisked FCF yields post FY22 of more than 50% based on present plans. SDX has yet to establish a dividend policy, however the company has indicated that a dividend could be distributed from 2022. At the current share price and assuming 40% of FCF distribution, we estimate dividends could yield up to 20% from 2022.

Valuation: RENAV at 45.0p/share

Our RENAV remains at 45.0p/share, as we have adjusted our short-term commodity price assumptions and updated capex in line with the 2021/22 work plan. Currently, our valuation does not account for Hanut or Warda, which could add significant upside, as SDX waits for the extension to exploration rights to be granted. The current share price appears to be heavily discounting SDX-sanctioned projects, which correspond to c 80% of our RENAV, as well as any future growth potential in Egypt and Morocco.

Strong production supports cash generation

At its capital markets day, SDX provided an update on its strong production, reiterating guidance for 2020 at 6,000–6,250boed (which includes North West Gemsa and South Ramadan production) and strong cash generation. The presentation focused on detailing the prospectivity around the South Disouq field in Egypt and the BMK area and the newly identified prospectivity in the Top Nappe play in Morocco.

In Egypt, the company is focusing on six primary prospects amounting to a total prospective recoverable resource of 233bcf. Hanut is the most material prospect, with a management estimated prospective recoverable resource of 139bcf, followed by Mohsen with 26bcf, El Deeb 22bcf, Warda 14bcf, Ibn Newton and Newton (a dual prospect) 16bcf, and the Shikabala cluster with 16bcf.

Exhibit 1: South Disouq exploration prospect overview

Source: SDX Energy

In Morocco, the successful wells at BMK-1 and OYF-2 drilled in Q120 have extended the existing production and development area to the north of Sebou. Management estimates that these wells de-risked more than 18bcf of recoverable resource in the BMK area. SDX is seeking to accelerate a four-well exploration campaign to H121 that will develop the potential of the area, and confirm the potential of the extension to the core area. There is also potential in the new Top Nappe play below SDX’s core area, and the company will seek to test this play with a dual target well during the next drilling campaign. Future discoveries would allow SDX to expand the infrastructure incrementally so that future connection costs are managed sustainably.

Hanut: Potential high-impact South Disouq well

In 2021, SDX will drill one exploration well in South Disouq, on the potentially high-impact Hanut prospect, which management estimates holds 139bcf recoverable volumes. The prospect was identified after the company had reviewed the remaining prospectivity of the area, particularly in the basal Kafr El Sheikh (KES) horizon, which had been de-risked by the Ibn Yunus and Sobhi discoveries.

Hanut sits 4.5km to the south-east of the South Disouq field on the eastern margin of the South Disouq concession. Terms to extend the exploration period by two years for the area covering Hanut and Mohsen are required, given the exploration licence expired in 2020. The terms of the extension have been agreed between SDX and EGAS, but are pending on final ministerial and parliamentary ratification, expected in H121. SDX will operate the well and is in discussions with partner IPR (WI 45%) regarding its participation.

Exhibit 2: Seismic section with high amplitude response

Exhibit 3: Hanut Base KES negative amplitude extraction

Source: SDX Energy

Source: SDX Energy

Exhibit 2: Seismic section with high amplitude response

Source: SDX Energy

Exhibit 3: Hanut Base KES negative amplitude extraction

Source: SDX Energy

The Hanut prospect is a basal KES formation turbidite sand deposit, defined by a high-amplitude response (shown in bright blue in Exhibit 2) on 3D seismic, which shares the same seismic response characteristics seen in the proven basal KES gas accumulations in Ibn Yunus and SD-12X. Hanut is a stratigraphic prospect, relying on the overlying shales to provide a trap. SDX has assigned a 33% chance of success (CoS), reflecting the fact that the eastern closure is not fully imaged (cf the nearby smaller Mohsen prospect, to be drilled in 2022, which has a 51% CoS and is fully covered by 3D seismic).

In the event of success, a discovery of 139bcf would be a step change for South Disouq, given the existing dry gas 2P reserves for South Disouq and Ibn Yunus is 84bcf (based on end-2019 reserves audit). SDX plans to drill Mohsen and Warda, two further prospects similar to Ibn Yunus and SD-12X, in 2022, targeting P50 prospective recoverable resources of 26bcf and 14bcf respectively.

Exhibit 4: SDX Energy 2021–22 activities plan

Source: SDX Energy

Valuation

We value SDX using an asset-by-asset net asset value (NAV) derived from detailed discounted cash flow modelling. The core value includes production, development and contingent resources that could be developed, while exploration is valued only if wells are planned and funded in the next 12 months. We apply a 12.5% discount rate given the geographical distribution of the assets and the size of the company. We have updated our short-term commodity prices based on the latest EIA estimates. Our short-term Brent assumptions move from $41.9/bbl to $40.6/bbl in FY20 and from $49.1/bbl to $46.6.1/bbl in FY21, based on EIA forecasts published in November 2020. Our long-term price assumptions remain in line with our previous note, where we presented three scenarios with Brent in 2020 at $40/bbl in our low case scenario, $50/bbl in our mid-case scenario and $60/bbl in our high case scenario, escalated at 2.5% per year resulting in 2022 prices of $42.0/bbl, $52.5/bbl and $63.0/bbl, respectively. We continue to assume Moroccan gas prices of $10.85/mcf in 2020 inflated at 2.5%. In addition to commodity prices, key changes to our updated valuation and estimates include updated FY21 capex based on the company’s proposed work programme.

Exhibit 5: Edison updated forecasts

New

Old

Difference

2020e

2021e

2020e

2021e

2020e

2021e

Production (kboed)

5.8

6.4

5.8

6.4

0%

0%

Revenue ($m)

42.6

43.5

37.9

44.0

12%

-1%

EBITDA ($m)

25.2

31.1

20.5

31.6

23%

-2%

Capex ($m)

26.2

23.1

26.2

19.7

0%

17%

 

 

Brent ($/bbl)

40.61

46.59

41.90

49.07

-3%

-5%

SD gas price ($/mcf)

2.85

2.85

2.85

2.85

0%

0%

Sebou gas price ($/mcf)

10.85

11.12

10.85

11.12

0%

0%

Source: Edison Investment Research. Note: FX US$1.27/£ based on the average of Q220 and Q320.

In Egypt, our updated valuation includes net proceeds for the disposal of North West Gemsa and South Ramadan as the company successfully disposed of the assets in July 2020 and November 2020, respectively, for a total of $2.1m. The updated valuation includes a second producer well at Ibn Yunus, to be added in Q2/Q321 to maximise recovery from the field. In Morocco, we continue to include the reserves reported at 31 December according to the FY19 annual report as well as the SAH-3 and OYF-2 wells, which were already completed as commercial discoveries during Q120. For 2020, we maintain our estimates in Morocco with a gas production level of 5.95mmscfd for the year, in line with guidance of 5.3–6.0mmscfd. Risked exploration includes the BMK-1 discovery and the potential 18bcf located in close proximity to the BMK-1 well in what the company calls the BMK area, and the LMS-2 discovery. The LMS-2 well indicates 10.6m of net gas reservoir with 30.9% porosity in the well. However, testing is required to determine its commercial potential once COVID-19 restrictions are eased, allowing SDX to bring a testing crew into the country.

Exhibit 6: SDX Energy NAV breakdown

Source: Edison Investment Research

We highlight that at this point we are not taking into consideration the 233bcf prospective resources of potential additional upside that is currently being evaluated by the company in the South Disouq area. However, as these projects develop and the exploration licence extension is granted, we will update our valuation accordingly. All in all, our mid-case risked exploration net asset value (RENAV) remains in line with our last note at 45.0p/share, with our core value standing at 36.2p/share, equivalent to 80% of our RENAV, and materially different from the current share price of 18.0p/share. Overall, our core net risked valuation remains broadly in line with our previous note at $94m, reflecting the lower near-term oil price estimates, offset by the net proceeds from South Ramadan disposal.

Exhibit 7: SDX Energy detailed valuation

Asset

Country

 

Diluted WI

%

 

Recoverable reserves

 

Low
($40/bbl)

Mid
($50/bbl)

High
($60/bbl)

CoS

Gross

Net WI

Net

NPV

Net risked value

Net risked value per share

%

mmboe

mmboe

mmboe

$/boe

$m

p/share

p/share

p/share

Net cash at 31 December 2019

11.1

4.3

4.3

4.3

SG&A - NPV12.5 of three years

(9.2)

(3.5)

(3.5)

(3.5)

FY20 E&A expense

(17.6)

(6.8)

(6.8)

(6.8)

NPV of net receivable recovery

9.7

3.7

3.7

3.7

Sebou pipeline residual value (30% cost)

9.8

3.8

3.8

3.8

Egypt disposals net proceeds

2.1

0.8

0.8

0.8

Production

Meseda Base + workovers + Rabul

Egypt

50%

90%

9.0

4.5

1.7

3.7

14.9

4.3

5.7

7.2

South Disouq + Sobhi

Egypt

70%

100%

18.7

12.1

12.1

3.0

36.4

13.9

14.0

14.1

Sebou 2P + volumes to be booked

Morocco

75%

100%

1.4

1.0

1.0

36.2

36.8

14.2

14.2

14.2

Core NAV

 

 

 

29.1

17.6

14.8

4.2

94.0

34.6

36.2

37.7

Exploration (known)

BMK + LMS-2

Morocco

75%

62%

3.7

2.7

2.7

13.5

23.0

8.8

8.8

8.8

Total NAV

 

 

 

32.8

20.4

17.6

117.0

43.4

45.0

46.6

Source: Edison Investment Research. Note: Number of shares = 205.4m; FX = US$1.27/£.

Financials

We forecast year-end 2020 net cash of $16.6m and note that SDX’s European Bank for Reconstruction and Development (EBRD) loan facility of $2.5m remains undrawn. Management intends to extend the tenor and re-establish the full availability of the $10m credit facility, subject to the customary satisfaction of conditions precedent in early 2021. Based on the capex projections that underpin our production forecasts and SDX’s committed exploration programme, the company is fully funded for 2020 and 2021 and we forecast positive free cash flow (FCF) from 2021. We do not yet take into consideration capex for the Hanut and Mohsen wells given these are still contingent on final ministerial and parliamentary approval for the two-year extension to the South Disouq exploration area. We expect FCF in the coming years to be material, giving the company headroom for additional investments. As more than 90% of cash flows in the coming years will come from the fixed-price contracts gas businesses, we do not currently foresee the need for further equity capital, unless incremental growth capex, over and above our forecasts, is dedicated to new projects or acquisitions. Management’s stated strategy is to grow the company both organically and inorganically.

Exhibit 8: Capex and cash flow forecasts

Source: SDX Energy, Edison Investment Research, Note: CFO = cash flow from operations.

South Disouq and Sebou are cash-generative assets, with low operating costs and fixed gas price contracts. Given SDX’s market cap, and organic and inorganic growth opportunities, we would expect management to direct cash to extend its reserve life index – either through the drill bit or via acquisitions. Hanut, Warda and Mohsen could extend the South Disouq plateau with low investment required, given the central processing facility (CPF) is already in place. In Morocco, SDX is the only operator, other than ONHYM, that produces gas in country and is the main supplier in its area of operations, hence any discoveries around its facilities would also add value at a low investment cost. If no capital is allocated to growth opportunities, operations would cease once South Disouq had completed operations by 2030.

While we expect SDX to continue to recycle much of its FCF to grow both organically and inorganically, over time we see the potential for the company to also distribute some FCF back to shareholders as dividends. The company has not yet established a dividend policy, but based on SDX’s firm exploration and development commitments (shown in Exhibit 4), including Hanut, Warda and Mohsen, we see the potential for the company to pay a dividend of c $10m pa, based on a 40% FCF payout assumption (Exhibit 10). This unrisked FCF projection and associated dividend is the equivalent of a c 20% yield at the current share price and could be payable from 2022/23.

In the event the company does not drill Hanut, Warda and Mohsen (given they are still contingent on final ministerial and parliamentary approvals), the company could still pay a dividend, based on the above assumptions (Exhibit 9). Note that such dividend projections do not include additional exploration and development capex beyond the company’s current plans, however with rapid monetisation of discoveries, there is clear scope for an evolving dividend policy over time.

Exhibit 9: FCF and cash dividend at 40% of FCF in a scenario where exploration rights are not granted

Exhibit 10: FCF and cash dividend at 40% of FCF under current plan of activities

Source: Edison Investment Research. Note: This scenario reflects our current valuation, since SDX is still wating for exploration rights to be granted, and does not account for Hanut, Warda and Mohsen.

Source: Edison Investment Research. Note: This scenario does not reflect our current valuation, but is in line with SDX’s plan of activities and reflects the investments in Egypt once exploration rights are granted.

Exhibit 9: FCF and cash dividend at 40% of FCF in a scenario where exploration rights are not granted

Source: Edison Investment Research. Note: This scenario reflects our current valuation, since SDX is still wating for exploration rights to be granted, and does not account for Hanut, Warda and Mohsen.

Exhibit 10: FCF and cash dividend at 40% of FCF under current plan of activities

Source: Edison Investment Research. Note: This scenario does not reflect our current valuation, but is in line with SDX’s plan of activities and reflects the investments in Egypt once exploration rights are granted.

Exhibit 11: Financial summary

Accounts: IFRS, Yr end: December, USD: Thousands

 

2017A

2018A

2019A

2020E

2021E

Total revenues

 

 

39,166

53,679

53,233

42,603

43,504

Cost of sales (direct expense)

 

 

(10,254)

(11,934)

(13,900)

(8,694)

(8,536)

Gross profit

 

 

28,912

41,745

39,333

33,909

34,968

SG&A (expenses)

 

 

(8,793)

(7,270)

(6,072)

(3,932)

(4,030)

Other income/(expense)

 

 

1,820

1,025

1,161

984

764

Exceptionals and adjustments

(725)

(10,458)

(19,932)

(5,725)

(626)

EBITDA

 

 

21,214

25,042

14,490

25,236

31,075

Depreciation and amortisation

 

 

(17,824)

(17,268)

(26,295)

(15,842)

(18,706)

Reported EBIT

 

 

3,390

7,774

(11,805)

9,394

12,369

Finance income/(expense)

 

 

(129)

(542)

(511)

(552)

0

Other income/(expense)

29,558

(174)

0

1,114

1,114

Exceptionals and adjustments

0

0

0

0

0

Reported PBT

 

 

32,819

7,058

(12,316)

9,956

13,483

Income tax expense (includes exceptionals)

 

 

(4,541)

(7,021)

(5,776)

(3,371)

(951)

Fx gains (losses)

 

 

0

75

(94)

0

0

Reported net income

 

 

28,278

112

(18,186)

6,585

12,532

Shares at end of period - basic

 

 

204

205

205

205

205

 

 

 

 

 

 

 

 

Balance sheet

 

 

 

 

 

 

 

Property, plant and equipment

 

 

54,445

48,680

67,895

58,217

59,090

Goodwill

 

 

0

0

0

0

0

Intangible assets

 

 

15,231

39,128

20,407

30,051

33,558

Other non-current assets

 

 

2,724

3,394

3,916

3,477

3,477

Total non-current assets

 

 

72,400

91,202

92,218

91,745

96,125

Cash and equivalents

 

 

25,844

17,345

11,054

16,578

25,752

Inventories

 

 

5,157

5,236

7,972

7,824

7,682

Trade and other receivables

 

 

37,656

24,324

21,774

17,690

15,076

Other current assets

 

 

0

0

0

0

0

Total current assets

 

 

68,657

46,905

40,800

42,091

48,509

Non-current loans and borrowings

 

 

0

0

0

0

0

Other non-current liabilities

 

 

4,506

4,572

6,698

7,521

7,521

Total non-current liabilities

 

 

4,506

4,572

6,698

7,521

7,521

Trade and other payables

 

 

19,459

14,418

25,724

23,592

21,233

Current loans and borrowings

 

 

0

0

0

0

0

Other current liabilities

 

 

2,473

3,078

2,565

1,122

1,122

Total current liabilities

 

 

21,932

17,496

28,289

24,714

22,355

Equity attributable to company

 

 

114,619

116,039

98,031

101,601

114,759

Non-controlling interest

 

 

0

0

0

0

0

 

 

 

 

 

 

 

 

Cashflow statement

 

 

 

 

 

 

 

Profit before tax

 

 

32,819

7,058

(12,316)

9,956

13,483

Net finance expenses

 

 

0

0

0

0

0

Depreciation and amortisation

 

 

17,824

17,268

26,295

15,842

18,706

Share based payments

 

 

538

1,194

178

626

626

Other adjustments

 

 

(34,613)

3,224

12,718

6,043

(764)

Movements in working capital

 

 

5,412

8,584

(504)

646

397

Interest paid / received

 

 

0

0

0

0

0

Income taxes paid

 

 

(364)

(1,091)

(1,306)

(3,371)

(951)

Cash from operations (CFO)

 

 

21,616

36,237

25,065

29,742

31,497

Capex

 

 

(24,917)

(44,810)

(31,315)

(26,203)

(23,087)

Acquisitions & disposals net

 

 

(24,948)

0

0

1,000

0

Other investing activities

 

 

760

525

639

984

764

Cash used in investing activities (CFIA)

 

 

(49,105)

(44,285)

(30,676)

(24,218)

(22,323)

Net proceeds from issue of shares

 

 

48,510

114

0

0

0

Movements in debt

 

 

(43)

(197)

(1,062)

0

0

Other financing activities

 

 

0

0

0

0

0

Cash from financing activities (CFF)

 

 

48,467

(83)

(1,062)

0

0

Increase/(decrease) in cash and equivalents

 

 

20,978

(8,131)

(6,673)

5,524

9,174

Currency translation differences and other

 

 

141

(368)

382

0

0

Cash and equivalents at end of period

 

 

25,844

17,345

11,054

16,578

25,752

Net (debt) cash start of period

 

 

25,844

17,345

11,054

16,578

25,752

Movement in net (debt) cash over period

 

 

21,119

(8,499)

(6,291)

5,524

9,174

Source: SDX Energy, Edison Investment Research


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This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by SDX Energy and prepared and issued by Edison, in consideration of a fee payable by SDX Energy. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

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Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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