SDX to shed 33% stake in Egypt's South Disouq asset
London-listed SDX Energy announced on February 1 it was divesting a 33% share in its flagship South Disouq gas project in Egypt for $5.5mn, noting this sum represented a significant premium to the asset's value.
SDX signed a share purchase agreement with Energy Flow Global Limited, a private upstream player working in Egypt, the Middle East and Asia. The deal will have an effective date of February 1, 2022, and payments will be made in the second and third quarters of 2022.
Proceeds from the deal will be used to fund a $3mn share buyback programme in the second half of the year, as well as for investment in growth.
SDX brought South Disouq on stream in November 2019, and the asset flowed 45.5mn ft3/day of gas in 2021. The sale comes after the company failed to find hydrocarbons at an exploration well in August targeting the project's Hanut prospect, by far the largest in the block.
"We will retain 67% of our pre-transaction interests in the South Disouq concession, remaining as operator, continuing to benefit from the cash-generation of the fields, while reducing our risk exposure on the two South Disouq exploration wells to be drilled this year," SDX CEO Mark Reid commented.
SDX has slashed its production guidance for South Disouq in 2022 to 2,280-2,420 barrels of oil equivalent/day to reflect the disposal, as well as some planned maintenance and well workovers. This is down from 4,465 boe/d it lifted in 2021. Overall production across the company's Egyptian and Moroccan operations is expected to average 3,300-3,550 boe/d last year, versus 5,886 boe/d in 2021.
A discovery at the upcoming SD-5X/Warda exploration well represents a potential upside, and would boost SDX's output to 3,600-3,850 boe/d, the company said. However a potential find at the Mohsen exploration well would have to be tied in, and so is not expected to contribute to SDX's production until mid-2023.