After shelling out for royalty payments and well-head costs, SDX Energy (SDX) made $41.7m (£31m) in so-called netbacks in 2018, equal to $32.01 per barrel of oil equivalent. How the North African explorer-producer turned that into net income of just $112,000 is a tale of operational setbacks and overreach, halting a strong run of cash preservation, adept dealmaking and sound cost control.
The roll call of financial hits begins not with a depreciation charge – which declined versus 2017 – but with an exploration and evaluation expense of $5.7m, most of which was incurred in two sub-commercial wells in Morocco and Egypt. But even after a $3.5m impairment to reflect lower oil price assumptions, and $4.8m of general and administrative costs, shareholders would still be looking at a handsome profit.
However, the second half of the year brought $2.5m of transaction costs, suggesting SDX bit off more than it could chew when it tried and failed to acquire a "significant package of assets in Egypt" from BP (BP.) in September. A tax bill equivalent to 98 per cent of current income did the rest of the damage.
The flipside to this has been a jump in the value of SDX’s exploration and evaluation assets from $15.2m to $39.1m, although cash and cash equivalents have dropped in each of the past three-quarters and shareholder equity has barely moved.
Analysts at Edison expect pre-tax profits of $34.2m and fully diluted earnings of 16¢ a share in 2019.
SDX ENERGY (SDX) | ||||
ORD PRICE: | 39.6p | MARKET VALUE: | £81m | |
TOUCH: | 39-40p | 12-MONTH HIGH: | 75p | LOW: 32.3p |
DIVIDEND YIELD: | NIL | PE RATIO: | N/A | |
NET ASSET VALUE: | 56.7¢ | NET CASH: | $17.3m |
Year to 31 Dec | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
2014 | 24.5 | 12.7 | 2.0 | nil |
2015 | 11.4 | 11.1 | 20.0 | nil |
2016 | 12.9 | -26.7 | -39.4 | nil |
2017 | 39.2 | 32.8 | 15.3 | nil |
2018 | 53.7 | 7.13 | 0.1 | nil |
% change | +37 | -78 | -99 | - |
Ex-div: | n/a | |||
Payment: | n/a | |||
£1=$1.32. |