Shares of oil and gas firm SDX Energy (LON: SDX) initially edged higher on Friday morning after the company confirmed it has received final approval from the Egyptian authorities to extend the Production Services Agreements governing its producing Meseda and Rabul oil fields in its West Gharib concession in Egypt.
The extension means the agreements are now valid until 9 November 2031.
The key terms of the extension include a commitment to drill six development wells by 31 December 2022 and one water injection well, four further development wells to be drilled during the extension period if Brent reaches $55 for twelve consecutive months, two additional development wells will be drilled if Brent hits $60 for twelve straight months.
The payment of a $2 million signature bonus will be deferred with $1 million paid in monthly instalments over the next twelve months and the remaining $1 million paid in two instalments of $0.5 million each, on 31 December 2022 and 31 December 2023.
There will also be an additional contingent bonus of up to $2 million payable if Brent reaches specific price points.
“We are very pleased to have secured this ten-year extension to the Production Services Agreement which we estimate increases SDX's share of reserves in our core West Gharib oil asset, certified at 2.2 million barrels in our 31 December 2019 CPR, by 60%,” said Mark Reid, CEO of SDX.
“With a breakeven price of approximately US$20 Brent and to take advantage of the current strong oil price, we plan to commence in Q2 of this year, a drilling programme of up to twelve wells over the next three years with the goal of growing gross production back to around 3,000bbl/d,” added Reid.
SDX’s share price climbed to 17.70p following the news. However, it is now flat on the day at 17p per share.
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