SDX Energy - FY19 management guidance reset
Despite our last published FY19 forecasts reflecting a more conservative production ramp-up than management guidance, SDX’s guidance revisions have resulted in a further downgrade to our short-term cash flow forecasts and NAV. We reduce FY19e production from 4.3kboed to 3.4kboed (-21%) and project more moderate growth in SDX’s Morocco gas demand with an associated RENAV impact of -42%. Key drivers of management’s downgrade include lower Sebou gas demand growth, a higher than anticipated water cut at North West Gemsa and a delay to production ramp-up at South Disouq. Our valuation falls from RENAV 86.5p/share to 49.8p/share (-42%), while our core NAV (producing assets and South Disouq) falls from 70.1p/share to 45.0p/share (-36%). Based on our latest estimates, we expect SDX to end FY19 with c $4.9m of net cash on the balance sheet.SDX Energy is engaged in the exploration, acquisition, development and production of oil and natural gas in Africa and Egypt. As of Dec 31 2010, total gross proved reserves for light and medium oil consisted of 3,593 thousand barrels ("mbbls"), natural gas liquids consisting of 211 mbbls and natural gas consisting of 2,575 million cubic feet.
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