Edison Issues Initiation on SDX Energy (SDX)

LONDON, July 26, 2016 /PRNewswire/ --

SDX Energy (SDX) is a London/Toronto-listed company with interests in two producing onshore fields in Egypt. Crucially for a small E&P, it will be cash flow positive in 2017 and is unlikely to return to the market for more equity to develop assets. The current work programme (of new wells, workovers and water flood) could see a more than doubling of recoverable volumes and is both cheap and relatively low risk. Once this work starts to bear fruit (later in 2016/17), the low-cost production will put SDX in the enviable position of being able to largely fund development of exploration prospects, while giving it resources and operational credibility to add further assets in Egypt. Our analysis indicates that the share price is more than supported by current operations, giving upside potential for the near-term production increases we see as likely and free exposure to exploration upside.

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Our analysis indicates the shares are supported by existing production. Successful re-invigoration at Meseda/NW Gemsa should lead to unlocking further (low-risk) value. Our core NAV of 41p/share includes risked value for the reinvigoration programme but could see further upside (to 56p/share) if the water flood programme is effective (not including risked exploration value at South Disouq). Value from any acquisition(s) will hinge on the size/price and possible upside of the targets, but SDX should be well placed to take part in consolidation within Egypt given the large number of opportunities in-country. Its policy of accepting payments in Egyptian pounds reduces payment risk and funds internal growth in the mid-term, but could limit potential for dividends/other corporate activity in the longer term.

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About Edison: Edison is an international equity research firm with a team of over 110 analysts, investment and roadshow professionals and works with both large and smaller capitalised companies, blue chip institutional investors, wealth managers, private equity and corporate finance houses to support their capital markets activity. Edison provides services to more than 420 retained corporate and investor clients from offices in London, New York, Frankfurt, Sydney and Wellington. Edison is authorised and regulated by the Financial Conduct Authority.

Edison is not an adviser or broker-dealer and does not provide investment advice. Edison's reports are not solicitations to buy or sell any securities.

For more information please contact: 

Will Forbes
Edison Investment Research  
+44-(0)20-3077-5749

Elaine Reynolds
Edison Investment Research  
+44-(0)20-3077-5713
oilandgas@edisongroup.com

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