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Research: Energy & Resources
SDX Energy has discovered gas at the LNB-1, Morocco with 300m of gas-bearing horizons discovered in an over-pressured section in the Lafkarena sequence. Heavy hydrocarbons contained in gas indicate a thermogenic hydrocarbon source rock, indicative of a new petroleum system that has previously not been encountered at Sebou. Preliminary estimates of recoverable gas at LNB-1 are un-risked mid-case volume of 10.2bcf with 55kbbls of condensate. This is significantly larger than the traps encountered at Sebou and exceeds the threshold for commerciality for a processing facility and pipeline to Sebou area. LNB-1 awaits logging and testing which will be carried out in due course once suitable equipment can be mobilised. We see this a material discovery for SDX, should flow tests confirm productivity, for two reasons: 1) well costs are marginally higher than at Sebou at c $2.7m but with un-risked recoverable volumes five times greater, per-well returns are likely to be significantly superior. In addition, once de-risked, the new play at Lalla Mimouna has the potential to rapidly de-risk SDX’s ability to meet projected gas demand in Kenitra. 2) liquids discovered at LNB-1 open up a new play fairway with potential to provide SDX with an additional revenue stream in Morocco that is not constrained by demand.
Written by
SDX Energy |
Lalla Mimouna - de-risks demand expectations |
Well result |
Oil & gas |
20 April 2018 |
Share price performance
Business description
Analysts
SDX Energy is a research client of Edison Investment Research Limited |
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SDX Energy has discovered gas at the LNB-1, Morocco with 300m of gas-bearing horizons discovered in an over-pressured section in the Lafkarena sequence. Heavy hydrocarbons contained in gas indicate a thermogenic hydrocarbon source rock, indicative of a new petroleum system that has previously not been encountered at Sebou. Preliminary estimates of recoverable gas at LNB-1 are un-risked mid-case volume of 10.2bcf with 55kbbls of condensate. This is significantly larger than the traps encountered at Sebou and exceeds the threshold for commerciality for a processing facility and pipeline to Sebou area. LNB-1 awaits logging and testing which will be carried out in due course once suitable equipment can be mobilised. We see this a material discovery for SDX, should flow tests confirm productivity, for two reasons: 1) well costs are marginally higher than at Sebou at c $2.7m but with un-risked recoverable volumes five times greater, per-well returns are likely to be significantly superior. In addition, once de-risked, the new play at Lalla Mimouna has the potential to rapidly de-risk SDX’s ability to meet projected gas demand in Kenitra. 2) liquids discovered at LNB-1 open up a new play fairway with potential to provide SDX with an additional revenue stream in Morocco that is not constrained by demand.
Year |
Revenue |
PBT* |
Operating |
Net cash |
Capex |
12/15 |
11.4 |
11.1 |
(5.2) |
8.2 |
(5.1) |
12/16 |
12.9 |
(26.7) |
(1.9) |
4.7 |
(11.9) |
12/17 |
36.3 |
3.3 |
21.6 |
25.8 |
(49.1)* |
12/18e |
65.2 |
31.2 |
49.8 |
26.1 |
(50.6) |
Note: *PBT is normalised, excluding amortisation of acquired intangibles, share-based payments. *Includes Circle acquisition ($28.1m).
We recently published a detailed update on our view of group valuation, which stands at a core NAV of 58.3p/share and RENAV of 65.6p/share. We expect to de-risk Ibn-Yunus, Egypt on flow testing, however indicatively moving to 80% chance of success from 32% would add 4.4p/share to our RENAV in our 90bcf recoverable case.
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Disclaimer
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Disclaimer
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Research: TMT
FY17 was a transformative year for Keywords with revenues growing by 57% and EPS by 52%. Like-for-like revenue growth accelerated to 15.1% (we estimate 18% stripping out recent acquisitions) highlighting the company’s strengthened position in the supply chain. With an expanded debt facility, we believe the company potentially has the acquisition firepower to more than double its EPS run rate exiting FY18, and see no obvious reason why the cycle should not repeat in FY19. The shares price in further strong progress, but nothing is new there, and sustained execution should continue to drive strong returns.