SDX Energy - Sobhi sole risk delivered a commercial discovery

SDX Energy recently reported its FY19 results reflecting a 14% increase in production driven by the start of production at South Disouq in Egypt, and its accelerated ramp-up ahead of expectations. The drilling campaign in Morocco resulted in seven discoveries and a tenth well is to be tested. The company ended the year with a cash balance of $11.1m and is fully funded for all 2020 activities from existing cash flows. In this note we update our valuation to reflect, among other things, FY19 results and the uncertainty caused by COVID-19. Our mid-case RENAV valuation has decreased to 40.7p/share from 53.9p/share (-24%) as we adjust our short- and long-term oil price assumptions, revise our forecasts to reflect the 2P reserve base update and remove Salah and Young prospects from our valuation.