SDX Energy - In an enviable position in the sector

At its recent capital markets day, SDX Energy reiterated 2020 production guidance and highlighted its strong cash generation, with c 90% of post-tax operating cash flows derived from fixed-price gas contracts. Management presented its 2021/22 plan of activities, targeting three wells in Egypt with potential to add 179bcf of recoverable reserves from a 233bcf exploration portfolio under assessment, and at least four exploration wells in Morocco. With increasing FCF, capital is likely to be directed to expansion of reserves but, absent this, offers the alternative option of returning capital to shareholders. Our mid-case RENAV remains in line with our last valuation at 45.0p/share.

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