SDX Energy was created in October 2015 through the merger of TSX listed Sea Dragon Energy and privately owned Madison PetroGas. In 2016, the Company successfully obtained a dual-listing on the Alternative Investment Market (AIM) of the London Stock Exchange, raising US$11 million in the process. The funds were spent on a development program at Meseda and the completion of the 3D seismic acquisition campaign at South Disouq. In June 2016, we relinquished our interest in Bakassi West in Cameroon. This asset was acquired by SDX in October 2015 as a result of the merger, and whilst the concession was an exciting opportunity, it was fundamentally non-core. Our subsequent exit allowed SDX to focus all of our efforts on growing our high margin production business in our core assets in Egypt.
In January 2017, SDX successfully acquired a portfolio of oil and gas production and exploration assets in Egypt and Morocco, which were formerly held by Circle Oil plc, for a cash sum of $30 million. The acquisition is expected to increase our net production by 247% to 4,705boepd (approx.), and our working interest 2P reserves to 12.03MMboe, a 64% rise. The transaction was achieved via a $40 million share placing, which was well received and saw new investors participate and existing institutional holders maintain their equity positions.
The corporate activity that has taken place since the merger in 2015 has resulted in a financially strong and stable business, with high margin producing assets and significant growth potential. Despite the oil price downturn our low cost base means SDX can generate positive cash flow down to US$21/bbl Brent and importantly leaves us well placed to benefit from any increase in the oil price.
Looking at our production profile, following completion of the Circle Oil plc acquisition, SDX now possesses a 50% interest in the North West Gemsa concession, increased from 10%, and a 50% working interest in the Meseda licence, both of which are onshore and in the Eastern Desert of Egypt. In Morocco the Company has a 75% working interest in the Sebou concession, located in the Rharb basin, which has been subject to extensive 2D and 3D seismic testing and has current average production of 6.2MMscf/day (1,033 boepd). SDX also owns at 75% interest in the Kenitra industrial zone pipeline and local gas distribution network, which has capacity to transport 23.5MMscf/day.
The Company also possesses a number of exciting exploration assets in Egypt and Morocco. At our South Disouq concession, located in the Nile Delta, we have completed the acquisition of 300 km2 of 3D seismic and are planning to drill our first exploration well in which we are carried our partner, on the licence in Q1 2017. In Morocco, we are undertaking an internal review of the prospective portfolio in Sebou and Lalla Mimouna with the objective of commencing the drilling campaign in 2017, originally scheduled for 2018. This will be achieved by high grading the prospect portfolio and conducting extensive due diligence on the rig market. In parallel to this we have mapped out an active work programme for our Meseda licence, in Egypt, and plan to upgrade the treating capacity facility to 20,000 bfpd having already procured the necessary equipment to do this. Once the facilities upgrade is complete the workover program will recommence with net production anticipated to double on the licence over the course of 2017.
The operating environment in North Africa continues to present considerable opportunities for us. SDX’s proven track record as a successful operator, with strong in country relationships, means we remain well placed to increase our production profile over the coming years. The geology in Egypt remains exciting and is home to three of the most value accretive hydrocarbon basins in the world and some of the largest commercial discoveries, Eni’s Zohr field, in recent years. Morocco is home to one of the best E&P fiscal regimes in the world and the local supply shortfall for natural gas means the domestic market can be highly profitable for producers in the region.
The last 12 months have been a transformational period for SDX Energy and I look forward to updating our stakeholders on the Company’s progress over the course of 2017.