SDX Energy Plc
2020 Annual Report & Accounts
Supplying energy
in an environmentally
conscious manner
to the benefit of all
our stakeholders
Annual Report
CEO’s Comment
“After what has been a very disruptive period for both businesses and people, I am extremely
pleased to announce a set of results featuring record production, a strong balance sheet and
successful drilling results.
Operationally, 2020 was a strong year for the Group and although the COVID-19 pandemic
contributed to a low oil price environment, SDX’s high fixed-price gas assets in both Egypt and
Morocco demonstrated the cash-generative resilience that exists within our portfolio. While Morocco
production saw demand fluctuations early in the period, we are now back to pre-lockdown levels of
production with 2021 production expected to be 8-12% higher than in 2020.
Our exploration efforts in the period were also positive in both Egypt and Morocco, with our largest
discovery, the SD-12X well in South Disouq, having been brought on stream before the end of the
year. As well as adding reserves through the drill bit, the Group also continued to manage its portfolio
with the sale of non-core assets in North West Gemsa and South Ramadan, adding further to the
Group’s cash and reducing its associated capex.
With a 39% increase in EBITDAX from continuing operations to US$32.9 million, our strong focus
on capital discipline and our balance sheet stewardship, we have ended the year with a healthy cash
balance and clarity over our work programme for the next two years, funded from our cash position.
This work programme includes a transformational prospect with the Hanut well having the potential
to significantly increase Company reserves. Furthermore, the recently approved ten-year extension
of our West Gharib oil concession increases our share of reserves in the asset by 60% year on year and
119% taking account of 2020 production. With a breakeven Brent price of approximately US$20/bbl
this is an extremely positive development given current oil prices. We have also made excellent
progress with various ESG initiatives and I am particularly proud to announce that our carbon intensity
in 2020 was only 1.8kgCO2e/boe for our operated assets, one of the best performances in the
industry.
Finally, I would like to thank all of our team for their tireless work rate and commitment in what was
tough period for all as we tackled challenges seldom seen before. The outlook for SDX is extremely
bright and we look forward to delivering on our goals for the coming period and enhancing value
for all stakeholders in the Company.”
Contents
Strategic Report
Our Highlights 01
Where We Operate 04
Our Strategy 06
Chairman’s Statement 07
Chief Executive Officer’s Review 08
Review of Operations 10
Financial Review 24
Principal Risks & Uncertainties 30
S.172 Statement 31
ESG Report 33
Corporate Governance
Board of Directors 38
Chairman’s Introduction to Corporate Governance 40
Statement of Corporate Governance 41
Directors’ Report 43
QCA Code Compliance Disclosures 44
Remuneration Committee Report 50
Nomination Committee Report 54
Audit Committee Report 55
Reserves Committee Report 56
Statement of Directors’ Responsibilities 57
Financial Statements
Independent Auditors’ Report 60
Consolidated Balance Sheet 66
Consolidated Statement of Comprehensive Income 67
Consolidated Statement of Changes in Equity 68
Consolidated Statement of Cash Flows 69
Notes to the Consolidated Financial Statements 70
Parent Company Balance Sheet 92
Parent Company Statement of Changes in Equity 93
Notes to the Parent Company Financial Statements 94
Corporate Information IBC
3 / SDX Energy Plc / 2020 Annual Report
Annual Report
Our Highlights
Operational
Financial
6,397boe/d
FY 2020 average entitlement production,
an increase of 57% year on year
US$36.5m
FY 2020 netback, an increase of 29%
year on year
SD-12X
South Disouq brought on stream within
2020 average entitlement production
US$32.9m
FY 2020 EBITDAX, an increase of 39 %
year on year
1.8kgCO2e/boe
FY2020 carbon intensity at SDX’s
operated assets
US$24.7m
FY 2020 CAPEX, below market guidance
of US$26.1m
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• Average entitlement production of 6,397
boe/d, an increase of 57% year on year
due to strong production levels mainly from
South Disouq, at 49.5 MMscfe/d equating
to 4,532 boe/d net to SDX.
• 2020 production from core assets either
exceeded or was at the top end of market
guidance, despite COVID-19 interruptions
in Morocco. Capex was below guidance,
primarily due to drilling at West Gharib
being deferred due to the lower oil price
environment in 2020.
• 2021 guidance for production is
5,620-5,920 boe/d and for capex
is US$25.0-US$26.5 million.
• The Company’s operated assets recorded
a carbon intensity of 1.8kgC02e/boe in
2020 which is one of the lowest rates in
the industry.
• The 2020 South Disouq two-well drilling
campaign finished with a discovery at,
SD-12X (100% working interest to SDX).
First gas was achieved in December 2020,
5-6 weeks ahead of schedule.
• Following further review of the 3D seismic
after the SD-12X discovery, c.233bcf of
close to infrastructure, mean unrisked
recoverable volumes, located in productive
horizons have been high-graded to drill-
ready prospects.
• Subject to receipt of final Ministerial and
Parliamentary approval for a two-year
exploration concession extension, the
Company plans to drill the Hanut prospect
targeting 139bcf in Q3 2021
• As at 31 December 2020, the Company's
working interest share of audited
2P reserves was 11.1 mmboe and audited
2C contingent resources was 0.9 mmboe.
The 0.9 mmboe of 2C resources relates to
the Meseda and Rabul producing assets in
its West Gharib concession in Egypt and will
be converted to 2P reserves upon approval
of a development plan.
• The Company's 2P reserves and 2C
resources estimates have been audited
in accordance with the COGE Handbook
& PRMS by Gaffney, Cline & Associates,
an independent qualified reserves
evaluator and auditor.
SDX Energy Plc / 2020 Annual Report & Accounts / 01
Strategic Report
Our Expertise /
Onshore
02 / SDX Energy Plc / 2020 Annual Report & Accounts
Strategic Report
Page title
Strategic Report
Our Highlights 01
Where We Operate 04
Our Strategy 06
Chairman’s Statement 07
Chief Executive Officer’s Review 08
Review of Operations 10
Financial Review 24
Principal Risks & Uncertainties 30
S.172 Statement 31
ESG Report 33
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SDX Energy Plc / 2020 Annual Report & Accounts / 03
Strategic Report
Where We Operate
A MENA focused
Oil & Gas company
Morocco
The Company’s Moroccan
acreage consists of five
concessions, all of which are
located in the Gharb Basin in
northern Morocco.
See more on page 18
Lalla Mimouna
Nord
Gharb Centre
Lalla Mimouna
Sud
Sebou
Moulay Bouchta
Ouest
4,239km2
Combined concession area
5
Concessions
75% working interest in each
04 / SDX Energy Plc / 2020 Annual Report & Accounts
Egypt
SDX Energy is actively involved
in exploration and development
activities in Egypt's Eastern Desert
and Nile Delta basins.
See more on page 12
143km2
Combined concession area
2
Concessions
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SDX Energy Plc / 2020 Annual Report & Accounts / 05
Strategic Report
Our Strategy
SDX’s strategy is to leverage existing our organisational capabilities and competitive positions/relationships,
supported by strong ESG values, to access organic and inorganic, low-cost, high-margin opportunities which
generate stable cash flows and self-funded upside. Our vision is become a mid-cap energy company in 3-5
years with strong, natural mitigations to low commodity prices that delivers on our purpose of supplying
energy in an environmentally conscious manner to the benefit of all our stakeholders.
We will execute this strategy using our strategic capabilities across five areas:
Technical
Low-cost drilling & project
development
Subsurface expertise with
track record of exploration
success
Operations
Safe, experienced
North African operator
Low-cost onshore
operator
Management
Clear strategy
Strong leadership
Focused on risk
management
Committed to ESG
Financial
Strong financial discipline
Long-term fixed-price gas
contracts & low opex/bbl
mitigates commodity price risk
Shareholder support
for growth
Cultural
Strong HSE culture
Entrepreneurial
Commercially agile
Dynamic capability to
respond to environment
06 / SDX Energy Plc / 2020 Annual Report & Accounts
Strategic Report
Chairman’s Statement
I am especially pleased to
tell you that SDX has
delivered on its
commitment to ESG
principles by reporting key
metrics externally for the
first time.
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2020 was a challenging year for both business
and society in general, with the COVID-19
pandemic affecting how we as a Company went
about our business, and how we as people lived
our lives. While the challenges the pandemic
created were vast, it brings me a real sense of
pride that the team at SDX overcame these
admirably to complete what was a successful
period for the Company, both operationally and
financially. SDX finished the year with a healthy
cash position, its highest annual production rate
to date, and two drilling campaigns resulting in
several discoveries, which have already been
brought into production.
I am especially pleased to tell you that SDX has
delivered on its commitment to ESG principles
by reporting key metrics externally for the first
time. SDX has a powerful ESG message with
natural gas making up 90% of current
production, meaning that in Morocco alone,
our operation reduces CO2 emissions at our
customer locations by over 60,000 tonnes per
year by removing more polluting fuels from the
energy mix. Our South Disouq asset in Egypt
runs on produced natural gas, a key driver for
its low carbon intensity.
2020 was our first year of full production from
the South Disouq field, where uptime from the
production facilities has been exceptional.
This cornerstone asset, where gas production
is sold under 25-year fixed-price contracts,
means that in disruptive periods, such as the
past 12 months, we can continue to generate
cash and plan for the future. It was therefore
good news to have exploration success in April
2020 as the SD-12X well proved to be a
commercial gas discovery. It was tied in before
year end and will contribute to our cash flow in
2021 and beyond.
Although COVID-19 created some disruption
in demand from our customers in Morocco early
in 2020, demand steadily increased throughout
the year to return to its pre-lockdown levels
by year end. The period also saw several of
Morocco’s successful wells from the 2019-20
campaign being tied in, enabling the Company
to benefit from attractive gas prices.
The coming period will see a busy schedule
of more high-impact wells in both Egypt and
Morocco, which SDX will fund through its
carefully managed balance sheet. These new
wells will allow the Group to increase production
and reserves in a sustainable manner. It is this
careful management of the Company’s finances
during periods of disruption that has enabled
SDX to maintain a healthy cash balance, strong
free cashflow, and a significant inventory of
drill-ready prospects.
On behalf of all my fellow board members,
I would like to thank all our stakeholders for
their continued support and commitment
throughout the period. The COVID-19 pandemic
has changed our world, making it more difficult
than usual to deliver on our targets. I am proud
of how resilient, committed, and focussed on
our goals our employees have remained over
the past many months. I am confident that
the coming period will see us further strengthen
our portfolio of cash-generative assets, strong
balance sheet, and talented workforce, and that
we will continue to grow and deliver value for all
our stakeholders.
Michael Doyle
Non-Executive Chairman
19 March 2021
SDX Energy Plc / 2020 Annual Report & Accounts / 07
Strategic Report
Chief Executive Officer’s Review
I would like to thank our
shareholders, the Board
and the senior leadership
team for their continued
support and understanding
during what must have
been one of the hardest
years for the industry yet.
It is impossible to talk about 2020 without
referring to the COVID-19 pandemic. However,
considering the spectrum of outcomes seen
across our and other industries, I believe that
the past year has demonstrated the quality and
resilience of our people and operations.
At the start of 2020, SDX enjoyed business
as usual conditions, reporting drilling successes
in both Morocco (OYF-2 and BMK-1 wells) and
Egypt (SD-12 X (Sobhi) exploration well).
n March, we received notice that three of
our Moroccan gas customers, accounting
for approximately 50% of daily consumption,
were being required to shut their plants to
comply with government restrictions. This
closure was lifted in May and we have seen a
strong rebound in demand, such that by the
08 / SDX Energy Plc / 2020 Annual Report & Accounts
end of the year, all customers were back to
pre-COVID-19 levels. I am delighted that our
Egyptian operations have been unaffected to
date, with both South Disouq and West Gharib
continuing to produce and sell as normal.
As the situation evolved, our UK team
transitioned to working from home, which they
did with admirable spirit and productivity.
The Egyptian and Moroccan teams both dealt
admirably with their own countries’ imposed
limitations. All the SDX staff handled 2020 with
tenacity, determination, and positivity, which
I was proud to see, and I would like to begin my
review by thanking each and every one of our
employees and contractors.
Despite the disruption to our Moroccan customers,
2020 production increased by 57% from 2019 to
an average entitlement of 6,397boe/d. The 2020
production guidance for all our core assets either
exceeded or was at the top end of the market
guidance. We deferred drilling at West Gharib in
the lower oil price environment, which brought our
2020 capex in below guidance.
Strategic Report
Page title
In Egypt, the South Disouq two-well exploration
drilling campaign was completed in the first half
of the year, resulting in a successful commercial
discovery with the second well, SD-12X (Sobhi).
This well was then tied back into the CPF and
first gas was achieved in December, six weeks
ahead of schedule. As a part of our ongoing
commitment to capital discipline and careful
management of the portfolio, we made the
decision to sell our North West Gemsa and
South Ramadan assets in Egypt, with the
net US$2.1 million proceeds exceeding our
expectations and providing additional cash
to further strengthen the balance sheet.
Gas consumption levels from our Moroccan
customers have returned to March 2020
pre-COVID-19 levels. In December, we added
another factory from an existing customer to
our distribution network. The testing of the
tenth well from the 2019-20 Moroccan drilling
campaign, LMS-2, was delayed last year due to
COVID-19 restrictions but is expected to be
tested as part of the 2021 campaign. Further
analysis of the well results and reinterpretation
of 3D seismic across all our concessions has
revealed that structures similar to that
penetrated by LMS-2 are present throughout
the Company's acreage, including in the existing
producing area. Subject to a successful test at
LMS-2, we may seek to test this prospectivity
during the 2021 drilling by deepening one of
the planned wells.
Demonstrating SDX’s continued strength over
the past year, our netback of US$36.5 million is
29% higher than the same period in 2019,
driven by a full year of production from South
Disouq. Our Morocco netback was also higher,
reflecting a strong recovery from COVID-19
shutdowns, albeit our West Gharib asset was
affected by lower sales realisations and
increasing water cut due to natural decline.
As we have now been granted an extension to
the West Gharib concession, we plan to arrest
this by starting a 12-well development drilling
programme with up to four wells in 2021.
The 2020 annual report includes our enhanced
ESG reporting on pages 33 to 35, which
demonstrates the low carbon footprint
(1.8kgCO2e/boe) of our operated assets.
We continue to save c.60,000 tons of CO2e
in our Moroccan operation and have had no
produced water discharges or hydrocarbon spills
in 2020. We did, unfortunately, have one minor
Lost Time Injury at South Disouq, but there has
been a rigorous review of the safety system and
I am confident in the updated protocols that
have been put in place.
Overall, SDX remains well placed to weather the
current macroeconomic uncertainties and
continues to screen a number of business
development opportunities. We expect cash
generation to continue strongly through 2021
and beyond as approximately 90% of the
Company's cash flows are expected to be
generated from our fixed-price gas businesses.
Our 2021 and 2022 work programmes are fully
funded and we continue to assess the optimum
use of capital in the interests of all stakeholders,
whether that be investment into new projects or
returning cash to shareholders. At present the
Company is focussed on investing in new
projects and considers this the most appropriate
use of the Company’s capital. This focus will be
assessed on an ongoing basis.
Finally, I would like to thank our shareholders,
the Board and the senior leadership team for
their continued support and understanding
during what must have been one of the hardest
years for the industry yet. The pandemic has
tested us all, and I am proud to say that SDX has
persevered and grown stronger. We look forward
to keeping everyone up to date on an active and
exciting year ahead for SDX.
Mark Reid
Chief Executive Officer and Director
19 March 2021
SD-12X
South Disouq brought on stream within
2020 average entitlement production,
an increase of 57% year on year
US$32.9m
FY 2020 EBITDAX, an increase of 39%
year on year
6,397boe/d
FY 2020 average entitlement production,
an increase of 57% year on year
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SDX Energy Plc / 2020 Annual Report & Accounts / 09
Strategic Report
Review of Operations
Health &
Safety
SDX is committed to
protecting the safety
of its employees,
contractors, and the
communities in which
it operates.
Regrettably, there was one minor Lost Time
Injury (“LTI”) at South Disouq during 2020
where a contractor was injured but returned
to work after three days. SDX immediately
conducted an incident report and lessons
learned exercise. The safety management
system was modified to ensure that similar
incidents should not occur in future. This LTI
was the first to be recorded by SDX Energy.
2020 was another incident and injury-free
year for Morocco, which has operated without
incident since SDX acquired the asset in 2017.
SDX maintains process safety by having a
robust programme of safety-critical device
identification, maintenance, and performance
testing. Despite the challenges of 2020, critical
device maintenance compliance remained above
our target of 98% compliance. We regularly test
the effectiveness of our incident management
processes by conducting both live and simulated
emergency response scenarios.
10 / SDX Energy Plc / 2020 Annual Report & Accounts
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SDX Energy Plc / 2020 Annual Report & Accounts / 11
Strategic Report
Review of Operations
South Disouq /
Egypt
South Disouq is a
121km2 concession
located 65km north
of Cairo in the Nile
Delta region.
It is on trend with several other prolific gas fields
in the Abu Madi Formation. SDX Energy holds a
55% interest and operates the concession, other
than in Ibn Yunus North field, in which it has a
100% interest. Its partner, IPR, holds a 45%
interest in the asset (excl. Ibn Yunus North).
Development leases have been granted for the
South Disouq, Ibn Yunus, and Ibn Yunus North
gas fields.
2020 Activity
Two exploration wells were drilled in H1 2020
in the South Disouq concession. The first well,
SD-6X (Salah), reached TD on 28 February 2020,
with sub-commercial gas accumulations in the
Kafr El Sheikh and the Abu Madi Formation
sands. SD-6X was subsequently temporarily
abandoned.
The second well, SD-12X (Sobhi), reached TD on
29 March 2020 when it encountered 108 feet of
gas-bearing sands. A drill stem test (DST)
conducted on SD-12X achieved a maximum rate
of 25 mmscf/d on a 54/64” choke and the well
was confirmed as a commercial discovery and
completed as a gas producer. An FDP and a
development lease application for Sobhi were
submitted to the Egyptian authorities and
subsequently approved. During the second half
of 2020, a 5.8km flowline was laid, connecting
the well to the CPF via the IY-1X tie in, and first
gas was achieved in December.
Following further review of the 3D seismic after
the SD-12X discovery, six prospects with c.233bcf
of close to infrastructure, mean unrisked
recoverable volumes located in productive
horizons, have been high-graded to ready-to-drill
prospects. The Company has agreed terms with
EGAS for a two-year exploration concession
extension, which will enable the prospectivity in
Hanut, Mohsen, El Deeb, and Ibn Newton to be
tested. The Shikabala and Warda prospects are
within 25-year development leases.
Working Unrisked Chance of
Prospect name interest % Interval Concession detail Comment mean (bcf) success (%)
55 KES Proposed 2 Yr(2) exploration extension Single Target 139 33
Hanut
Mohsen 55-100(1) KES Proposed 2 Yr(2) exploration extension Single Target 26 51
El Deeb 55-100(1) Qawasim Proposed 2 Yr(2) exploration extension Single Target 22 29
Ibn Newton/Newton 55-100(1) KES/Abu Madi Proposed 2 Yr(2) exploration extension Dual Target 16 40-45
Shikabala prospects (two wells) 100 KES/Qawasim Up to 25 Yr Development Lease to Single Target
31 August 2045 & Dual Target 16 25-40
Warda 55 KES Up to 25 Yr Development Lease to
2 January 2044 Single Target 14 35
233
Total
(1) Working interest % dependant on partner’s decision to participate in the extension. The Company’s partner has confirmed its participation in the Hanut-1X well.
(2) Two-year extension period commences on date of parliamentary approval.
SD-12X
discovery at South Disouq, drilled and
brought on stream within 2020
12 / SDX Energy Plc / 2020 Annual Report & Accounts
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Strategic Report
Review of Operations
continued
14 / SDX Energy Plc / 2020 Annual Report & Accounts
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South Disouq /continued
Egypt
2020 Activity (continued)
Production operations at the asset exceeded
expectations during the 12 months to
31 December 2020, with all four wells flowing
ahead of expected rates for the year and the CPF
achieving higher than planned levels of uptime,
resulting in gross production of 49.5 MMscfe/d
for the year (4,532 boe/d net to SDX). During the
second half of the year, the SD-4X and SD-1X
wells began to produce increased levels of water
and sand, resulting in reduced production. The
SD-4X well was successfully worked over in Q1
2021 and was put back on production, with SD-
1X expected to be worked over later in the year.
2021 Outlook
One development well, Ibn Yunus-2X, and one
exploration well, Hanut-1X, will be drilled
consecutively, commencing in Q2 2021. The IY-2X
well will access the eastern compartment of the
Ibn Yunus field and is expected to be completed
and tied back rapidly once drilled. The Hanut-1X
well is targeting unrisked mean recoverable
volumes of 139bcf with a 33% chance of success.
The Company’s partner has confirmed that it will
participate in both wells. An inlet compressor will
be installed at the CPF site to maximise recovery
from the fields, and well workovers will be carried
out. Once the exploration concession extension
that includes the Hanut and Mohsen prospects
has been ratified by Parliament, the Company will
pay its share of signature and training bonuses.
2021 capex is expected to be approximately
US$7.0-US$7.5 million net to SDX.
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4,532boe/d
FY2020 working interest production
SDX Energy Plc / 2020 Annual Report & Accounts / 15
Strategic Report
Review of Operations
continued
West Gharib /
Egypt
The concession is covered by a production service
agreement (“PSA”), which allows for lower cost
operations than the traditional joint venture
structure. SDX Energy has a 50% working
interest in the operation, with Dublin International
Petroleum, the operator, holding the remaining
50% working interest.
The Meseda field produces 18o API oil from
the high-quality Miocene-aged Asl sands of the
Rudeis formation. The Rabul field produces 16o
API oil from the Miocene-aged Yusr and Bakr
sands, which are also part of the Rudeis
formation.
In early 2021, SDX received confirmation that
the PSA has been extended to November 2031.
2020 Activity
During the early part of H1 2020, the Company
participated in the drilling of the Rabul-3 well,
reaching TD on 1 March 2020, when oil was
discovered in the Yusr and Bakr sands with a
total net pay of 116 feet. The well was
completed as a producer and came online on
13 April 2020. It stabilised, as expected, at gross
300 bbl/d.
A total of 15 well workovers were completed
during 2020 in the West Gharib and Rabul Fields:
Rabul-3 was recompleted in the Yusr reservoir
and the other workovers predominantly related
to pump and tubing replacements were also
completed.
For 2020, West Gharib average gross sales
production stood at approximately 3,285 boe/d
(626 boe/d net to SDX).
2021 Outlook
Having been granted the PSA extension, the
Company and its partner plan to develop both
the Meseda and Rabul fields via a drilling
programme of up to 12 wells over the next three
years with the goal of growing gross production
back to around 3,000 bbl/d, starting with four
wells in 2020.
2021 capex is expected to be approximately
US$2.5-US$3.0 million net to SDX.
West Gharib is 22km2
in area and is
currently producing
from the Meseda and
Rabul fields, both of
which are included in
the Block-H
development lease.
626bbl/day
FY2020 working interest production
10 year
licence extension received in 2021
2021
Development drilling campaign of up to
4 wells to commence
16 / SDX Energy Plc / 2020 Annual Report & Accounts
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Strategic Report
Review of Operations
continued
Morocco
The Company’s
Moroccan acreage
(SDX 75% working
interest and operator)
consists of five
concessions, all of
which are in the
Gharb Basin in
northern Morocco:
Sebou, Gharb
Occidental, Lalla
Mimouna Nord, Lalla
Mimouna Sud, and
Moulay Bouchta
Ouest.
The Sebou Central concession is a 220km2
exploration permit with several exploitation
concessions contained within it. The exploitation
concessions granted under the Sebou Onshore
Petroleum Agreement are:
• Gueddari Sud, expired 18 January 2020
- Gueddari Sud is essentially depleted and
the small remaining volumes were
produced past the expiry date with
ONHYM’s agreement.
• Sidi Al Harati SW, expiry 20 September 2023
• Ksiri Central, expiry 18 January 2025
• Sidi Al Harati W, expiry 17 October 2024
The Lalla Mimouna area comprises the Lalla
Mimouna Nord and Lalla Mimouna Sud permits
for a total land area of 2,211km2. SDX has
completed the work programme requirements of
the final extension of the Lalla Mimouna
Petroleum Agreement. In 2018 it applied for and
was granted an extension of two years to the Lalla
Mimouna Nord permit (1,371km2). The two-year
extension was used to evaluate how best to
commercialise the discoveries in the area. This
extension did not include any additional work
commitments. However, due to ongoing COVID-
19 restrictions in Morocco, the licence, which was
due to expire in July 2020, was granted a further
one-year extension, albeit this was also impacted
by the State of Emergency in Morocco preventing
foreign equipment and personnel from being
brought into the country. Now that SDX has
obtained permission from the authorities to
bring in equipment and personnel from certain
approved countries, it is expected that the
Company will test LMS-2, (discussed further
below), as part of the planned drilling campaign
later in 2021.
The Lalla Mimouna Sud permit lapsed in July
2018 and a new application was made in a
separate request. On 7 February 2019, the
Company was re-awarded the Lalla Mimouna Sud
permit (857km2) for a period of eight years, with
a commitment to drill one exploration well and
acquire 50km2 of 3D seismic within the first
two-and-a-half-year period, formally starting
on 14 March 2019.
The permit for the Gharb Occidental concession
was acquired on 1 June 2017 for a period of eight
years. Covering an area of over 1,362km2, it has a
work programme commitment to acquire 200km2
of 3D seismic, which was fulfilled in Q3 2018, and
to drill two exploration wells within the first four-
year period, the first of which was drilled in Q1
2018. The drilling of CGD-14 in October 2019
completed our work commitments for the initial
period of this programme. Furthermore, the
additional drilling that has already been
conducted in the permit will offset future
commitments in subsequent exploration periods.
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SDX Energy Plc / 2020 Annual Report & Accounts / 19
Strategic Report
Review of Operations
continued
Morocco /continued
The Company announced the award of the
Moulay Bouchta Ouest concessions from the
Government of Morocco on 7 February 2019.
This exploration concession was been awarded to
SDX for a period of eight years for a commitment
to reprocess 150 kilometres of 2D seismic data,
acquire 100km2 of new 3D seismic, and drill one
exploration well within the first three-and-a-half-
year period that formally started on 14 March 2019.
2020 Activity
The company completed its drilling campaign in
Morocco with the drilling of SAH-5 (spudded in
late 2019), SAH-3, OYF-2, BMK-1, and LMS-2.
Originally planned as a 12-well campaign, the
company achieved its objectives with 10 wells,
and elected to defer the remaining two wells to
preserve capital. The two postponed wells will
be drilled as part of a future campaign.
SAH-5 (TD 5 January 2020) was a sub-
commercial gas discovery made in Gharb Centre,
which was subsequently plugged and abandoned.
The SAH-3 well (TD 14 January 2020, testing
operation complete 20 February) was a
commercial gas discovery in Gharb Centre.
OYF-2 was a low-risk step-out exploration well,
which reached TD 22 January 2020 and was a
commercial gas discovery. A brief flow test was
completed on OYF-2 on 25 February 2020. The
BMK-1 well was a similarly low-risk step- out
exploration well in the northern part of Gharb
Centre. Due to down hole issues, the well was
side-tracked (BMK-1) and reached TD on 29
February 2020. It was subsequently suspended as
a commercial gas discovery. The success of BMK-
1 opens up a new area for further drilling. The last
well in the campaign was the LMS-2 appraisal
well in the Lalla Mimouna Nord permit. LMS-2
reached TD on 13 March 2020 with the discovery
of 10.6m of net gas pay in 30.9% porosity
sandstones, in a new Top Nappe play. The LMS-2
well has been cased and completed and is
expected to be tested as part of the 2021 drilling
campaign. The success of LMS-2, and the
discovery of the new Top Nappe play, has the
potential to open up the Lalla Mimouna Nord
permit to further drilling, thereby de-risking a
number of other prospects.
During the second half of the year, the OYF-2,
SAH-4, CGD-16, and SAH-6 wells were
connected. In December, an existing customer,
CITIC Dicastal, completed construction and began
commissioning its second factory premises,
having been tied into the Company’s distribution
infrastructure.
Morocco gross production averaged 6.5 MMscf/d
for 2020. Following a period of strong demand in
January and February, three customers
accounting for 50% of normal daily consumption
were required to close between mid-March and
early May due to COVID-19 restrictions imposed
by the Government of Morocco. Upon the
recommencement of production, these customers
gradually increased their consumption back to
pre-closure levels.
2021 Outlook
Four or five wells will be drilled in two campaigns
in Q2 and Q4 2021. As the drilling rig is stacked in
the Company’s yard in Morocco, there will be no
significant mobilisation cost. In addition, splitting
the campaign into two parts allocates the capital
investment over approximately eight months,
which allows the cost of these wells to be
comfortably covered by cash generated in that
period. Four wells will target shallow biogenic gas
that can be tied into the Company’s infrastructure
quickly and at low cost. As discussed above, the
tenth well from the previous campaign, LMS-2,
which penetrated a Top Nappe target, will be
tested. Should this test be successful, one of the
2021 campaign wells may be deepened to test
the Top Nappe prospectivity in the Company’s
core production area. On the assumption that the
rig continues to be available after the drilling of
the four firm wells, a fifth contingent well would
target an additional prospect in the portfolio. A
workover programme of up to seven wells will also
be conducted, including re-perforation and sliding
sleeve operations to exploit behind-pipe reserves
and maximise production and recovery from the
existing well stock. The second compressor was
commissioned in early 2021.
2021 capex is expected to be approximately
US$15.5-US$16.0 million net to SDX.
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Strategic Report
Page title
Asset disposals
The period saw the
sale of the Group’s
non-core North West
Gemsa and South
Ramadan assets in
Egypt.
The Company sold its 50% working interest in
North West Gemsa asset in July 2020, with an
effective date of 1 April 2020. Gross production
to 31 March 2020 was 3,056 boe/d (1,528
boe/d net to SDX), which equates to equivalent
actual entitlement production to the Company
of 382 boe/d for the full year. Prior to its sale,
the field exceeded expectations, primarily due
to a slower rate of pressure depletion and water
cut increase.
South Ramadan, situated offshore in the Gulf
of Suez, commenced production in Q2 2020 at
approximately gross 350 bbl/d. Post completion
of an acid stimulation operation, production
stabilised at gross 500-600 bbl/d. The asset was
sold effective 1 November 2020, with Company
equivalent actual entitlement production of
45 bbl/d for the year.
The net US$2.1 million proceeds received
from these asset sales exceeded management's
expectations and demonstrated the ongoing
focus and commitment to capital discipline and
careful management of the Group's portfolio.
The proceeds also provided additional cash to
strengthen the balance sheet further.
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US$2.1m
Net disposal proceeds from NW Gemsa
and South Ramadan asset sales
SDX Energy Plc / 2020 Annual Report & Accounts / 21
Strategic Report
Review of Operations
continued
Group proved
plus probable
reserves and
contingent
resources
22 / SDX Energy Plc / 2020 Annual Report & Accounts
The proved and probable reserves and contingent resources of the SDX Energy Plc Group presented below are extracted from an independent technical and
economic valuation of the Group’s Egyptian and Moroccan assets performed by Gaffney, Cline & Associates which has an effective date of 31 December 2020.
The reserve definitions used are contained within the Petrol Resources Management System (“PRMS”) as approved by the Society of Petroleum Engineers
and the Canadian Oil and Gas Evaluation Handbook.
Gas reserves at as 31 December 2019 and 31 December 2020 have been converted to barrels of oil equivalent (“boe”) using a factor of 6,000 cubic feet
per boe for reporting and comparison purposes. Actual calorific value of produced gas may result in a different conversion factor for individual assets.
All figures below are SDX Energy working interest in MMboe:
Egypt Morocco Total
South Disouq West Gharib NW Gemsa South Ramadan Gharb Basin
Asset
Working interest 55/100% 50% 50% 12.75% 75%
As at 31 December 2019 8.04 2.20 0.79 0.19 0.75 11.97
Asset disposals - - (0.65) (0.17) - (0.82)
Discoveries 2.11 - - - 0.32 2.43
Re-classification - 1.90 - - 0.09 1.99
Revisions (1.48) 0.02 - - (0.31) (1.77)
Production (1.63) (0.60) (0.14) (0.02) (0.30) (2.69)
As at 31 December 2020 7.04 3.52 - - 0.55 11.11
Proved reserves 3.23 2.36 - - 0.40 5.99
Probable reserves 3.81 1.16 - - 0.15 5.12
As at 31 December 2020 7.04 3.52 - - 0.55 11.11
Egypt Morocco Total
South Disouq West Gharib NW Gemsa South Ramadan Gharb Basin
Asset
Working interest 55/100% 50% 50% 12.75% 75%
2C contingent resources - 0.90 - - - 0.90
As at 31 December 2020 - 0.90 - - - 0.90
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Strategic Report
Financial Review
For the year ended 31 December 2020
Operational and financial highlights
In accordance with industry practice, production volumes and revenues are reported on a Company interest basis, before the deduction of royalties.
Quarter ended 31 December Year ended 31 December
US$’000s 2020 2019 2020 2019
West Gharib production service fee revenues 1,855 3,289 7,328 14,390
South Disouq gas sales revenue(1) 6,009 3,735 26,891 3,735
Royalties (2,026) (1,270) (9,115) (1,270)
Net South Disouq gas revenue 3,983 2,465 17,776 2,465
Morocco gas sales revenue 6,402 5,207 19,246 18,258
Royalties (278) (241) (730) (736)
Net Morocco gas sales revenue 6,124 4,966 18,516 17,522
Net other products revenue 570 445 2,448 445
Total net revenue(2) 12,532 11,165 46,068 34,822
Direct operating expense (2,817) (1,881) (9,535) (6,595)
Netback: West Gharib 1,037 2,037 3,642 9,889
Netback: South Disouq gas (3) 2,820 2,281 13,740 2,281
Netback: Morocco gas 5,288 4,522 16,703 15,612
Netback: Other products 570 444 2,448 445
Netback (pre-tax) (2) 9,715 9,284 36,533 28,227
EBITDAX (2) 8,745 8,405 32,874 23,550
NW Gemsa sales (boe/d) - 1,601 382 1,836
West Gharib production service fee (bbl/d) 589 738 626 795
South Disouq gas sales (boe/d) 3,790 2,375 4,286 599
Morocco gas sales (boe/d) 1,038 890 812 802
Other products sales (boe/d) 242 117 291 30
Total sales volumes (boe/d) (4) 5,659 5,721 6,397 4,062
NW Gemsa sales (boe) - 147,296 139,949 670,141
West Gharib production service fees (bbls) 54,159 67,855 229,275 290,091
South Disouq gas sales (boe) 348,698 218,535 1,568,735 218,535
Morocco gas sales (boe) 95,508 81,887 297,026 292,741
Other products sales (boe) 22,308 10,808 106,623 10,808
Total sales volumes (boe) (4) 520,673 526,381 2,341,608 1,482,316
Brent oil price (US$/bbl) $44.24 $63.41 $40.88 $64.33
West Gharib oil price ($US/bbl) $40.38 $57.04 $37.46 $58.39
Realised West Gharib service fee (US$/bbl) $34.25 $48.47 $31.96 $49.61
Realised Morocco gas price (US$/mcf) $11.17 $10.60 $10.80 $10.39
Royalties (US$/boe)(2) $4.87 $4.50 $4.94 $2.71
Operating costs (US$/boe)(2) $5.44 $4.96 $4.35 $8.12
Netback (US$/boe)(2) $18.75 $24.49 $16.73 $34.75
Capital expenditures 3,033 16,444 24,733 42,989
(1) South Disouq gas is sold to the Egyptian State at a fixed price of US$2.65MMbtu, which equates to approximately US$2.85/Mcf.
(2) The NW Gemsa and South Ramadan concessions have been recognised as a discontinued operations. All revenues, costs and taxation from these assets have been consolidated into a single line item “profit/(loss) from
discontinued operations” in both periods reported and are not included in this table. Royalties/boe, operating costs/boe and netback/boe also exclude NW Gemsa and South Ramadan.
(3) When calculating netback for South Disouq gas and other products (condensate), all South Disouq operating costs are allocated to gas, as associated products have assumed nil incremental operating costs.
(4) NW Gemsa and South Ramadan sales volumes included to show Group's entitlement interest production
24 / SDX Energy Plc / 2020 Annual Report & Accounts
Production service fees (relates to West Gharib only)
Production service fee volumes
The Company recorded service fee revenue relating to the oil production that is delivered to the State Oil Company (“GPC”) from the Meseda and Rabul
fields within Block H. The Company is entitled to a service fee of between 19.0% and 19.25% of the delivered volumes and has a 50% working interest.
The service fee revenue is based on the current market price of West Gharib crude oil, adjusted for a quality differential.
Production service fee pricing
For the 12 months ended 31 December 2020, the Company received an average service fee per barrel of oil of US$31.96, compared to the average
West Gharib price for the period of US$37.46, representing a discount of US$5.50 (15%) per barrel. The Company receives a discount on the West Gharib
price because of the quality of the oil produced.
Production service fee variance from prior year
For the 12 months ended 31 December 2020 (compared to the 12 months ended 31 December 2019), the decrease in production service fee revenue
by US$7.1 million, 49%, to US$7.3 million, was prompted by a decrease in price of US$4.0 million, 28%, in 2020 as the result of a declining oil price
environment and a 21% decrease in production of US$3.0 million. The lower production reflects an increase in water cut across several wells, which was
partly offset by a full 12 months’ contribution from a new well that came into production in the second half of 2019 (MSD-19) and a further well drilled
and put into production in April 2020 (RB-3). During the year, there was no COVID-19 impact on production operations.
US$’000s
Year ended 31 December 2019 14,390
Price variance (4,046)
Production variance (3,016)
Year ended 31 December 2020 7,328
Production service fee quarterly variance from prior year
For the 3 months ended 31 December 2020 (compared to the 3 months ended 31 December 2019), the decrease in production service fee revenue
by US$1.4 million, 42%, to US$1.9 million, was due to a 30% decrease in price and a 20% production decline, driven by increased water cut.
South Disouq gas sales revenue
The Company sells gas production from the South Disouq concession to the Egyptian national gas company, EGAS, at a fixed price of US$2.65/MMbtu
(approximately US$2.85/Mcf). The Government of Egypt’s entitlement share of gross production from the asset equates to approximately 51%.
Having commenced production in November 2019, during the 12 months ended 31 December 2020, production averaged 49.5MMscfe/d (gross).
Wells flowed ahead of expected rates and the Central Processing Facility achieved higher than planned levels of uptime during the first half of the year.
However, during Q3 and into Q4 2020, increased water and sand production at SD-4X resulted in lower gas volumes from this well. In late December
2020, the SD-12X well, which was announced as a discovery in April 2020, was brought on to production. The Company has a 100% working interest
in this well. During the year, there was no COVID-19 impact on production operations.
Morocco gas sales revenue
The Company currently sells natural gas to eight industrial customers in Kenitra, northern Morocco. During the second half of March 2020 and into
April 2020, COVID-19 containment restrictions in Morocco had a temporary impact on our operations, with three customers being required to close their
operations. In early May, these same customers were able to resume production, and consumption steadily increased such that all customers had returned
to pre-COVID consumption levels in Q4. The Company’s Moroccan business remains extremely resilient and can break even with customer consumption
levels at 20% of pre-COVID-19 2020 levels.
In December an existing customer brought its second factory online, which is expected to contribute to sales volumes in 2021.
Morocco gas sales variance from prior year
For the year ended 31 December 2020 (compared to the period ended 31 December 2019), the increase in Morocco gas sales revenue of US$1.0 million,
5%, was primarily driven by increased sales realisations (US$0.7 million, 4%) due to a strengthening of the Moroccan dirham and increased sales to
higher-priced contracts. In addition, production increased period on period (US$0.3 million, 1%), as COVID-19 shutdowns at three customer sites early
in the year were compensated for by a strong recovery in demand and an existing customer’s additional factory coming online in Q4 2020.
US$’000s
Year ended 31 December 2019 18,258
Price variance 721
Production variance 267
Year ended 31 December 2020 19,246
Morocco gas sales quarterly variance from prior year
For the 3 months ended 31 December 2020 (compared to the 3 months ended 31 December 2019), the increase Morocco gas sales revenue by
US$1.2 million, 23%, to US$6.4 million, was due to a 6% decrease in price due to a stronger Moroccan dirham and sales to higher-priced contracts
and a 17% production increase driven by strong customer demand following COVID-19 shutdowns earlier in 2020.
SDX Energy Plc / 2020 Annual Report & Accounts / 25
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Strategic Report
Financial Review
For the year ended 31 December 2020
Morocco gas sales revenue (continued)
Royalties
Royalties fluctuate in Egypt from quarter to quarter because of changes in production and the impact of commodity prices on the amount of cost
oil or gas allocated to the contractors. In turn, there is an impact on the amount of profit oil or gas from which royalties are calculated.
In Morocco, sales-based royalties become payable when certain inception-to-date production thresholds are reached, according to the terms
of each exploitation concession.
Direct operating costs
Direct operating costs for the year ended 31 December 2020 were US$9.5 million compared to US$6.6 million for the prior year. The direct operating
costs per concession were:
Year ended 31 December
US$’000s 2020 2019
West Gharib 3,686 4,501
South Disouq 4,036 184
Morocco 1,813 1,910
Total direct operating expense 9,535 6,595
The direct operating costs per boe per concession were:
Year ended 31 December
US$/boe 2020 2019
West Gharib 16.08 15.52
South Disouq 2.43 0.80
Morocco 6.10 6.52
Total direct operating costs per boe 4.35 8.12
West Gharib
Direct operating costs for the 12 months ended 31 December 2020 for West Gharib were lower by US$0.8 million compared to the prior year, at US$3.7
million due to lower field operational costs and lower workover activity. For the period ended 31 December 2020, the direct operating costs per bbl were
higher at US$16.08/bbl compared to US$15.52/bbl in the previous year due to fixed costs remaining unchanged against lower production, partly offset
by savings achieved on variable costs in the lower price environment.
South Disouq
Direct operating costs for South Disouq for the year ended 31 December 2020 were US$4.0 million. These costs included the Company’s US$0.6 million
share of a one-off production bonus. The production bonus was payable following sustained gross production of 5,000+ boe/d as per the terms of the PSC.
Morocco
Direct operating costs for the year ended 31 December 2020 for Morocco were US$0.1 million lower than in the prior year. The variance is the result of
lower field operational costs due to cost saving initiatives in the second half of the year.
Discontinued operations
During the year ended 31 December 2020, the Company disposed of its interests in the NW Gemsa and South Ramadan oil concessions in Egypt.
These assets have been classified as discontinued operations and contributed a net profit of US$1.8 million in 2020 (2019: net loss of US$0.4 million).
Neither disposal has had an impact on continuing operations.
26 / SDX Energy Plc / 2020 Annual Report & Accounts
General and administrative expenses
Year ended 31 December
US$’000s 2020 2019
Wages and employee costs 6,527 7,678
Consultants-inc. PR/IR 514 517
Legal fees 225 387
Audit, tax and accounting services 767 684
Public company fees 576 652
Travel
156 240
Office expenses 492 383
IT expenses 360 546
Service recharges (5,645) (6,506)
Ongoing general and administrative expenses 3,972 4,581
Transaction costs 152 1,079
Total net G&A 4,124 5,660
Ongoing general and administrative (“G&A”) costs for the period ended 31 December 2020 were US$4.0 million compared to US$4.6 million for the same
period of the prior year. Ongoing G&A costs in 2020 were lower primarily as the result of lower wages and employee costs due to the departure of the
former CEO and Head of BD in Q2 2019 which also included associated severance payments.
Transaction costs in 2020 related to professional services in support of the disposal of NW Gemsa and South Ramadan. 2019 transaction costs related
to the re-domicile of the Group from Canada to the UK, the Group’s capital reduction, and previous business development initiatives.
Capital expenditures
The following table shows the capital expenditure for the Company. It agrees with notes 9 and 10 to the Consolidated Financial Statements for the period
ended 31 December 2020, which include discussion therein.
Year ended 31 December
US$’000s 2020 2019
Property, plant and equipment expenditures (“PP&E”) 14,438 5,387
Exploration and evaluation expenditures (”E&E”) 10,192 37,403
Office furniture and fixtures 103 199
Total capital expenditures 24,733 42,989
The Company has future capital commitments associated with its oil & gas assets, details of which can be found in note 21 to the
Consolidated Financial Statements.
Exploration and evaluation expense
For the 12 months ended 31 December 2020, exploration and evaluation expenses stood at US$5.8 million, compared to US$11.4 million in the prior year.
The current period expense relates mainly to:
• The US$2.3 million write-off of a non-commercial well, SD-6X (Salah), including associated seismic costs, which was drilled during the 2020 Egypt
exploration drilling campaign; and
• the write-off of US$2.2 million for a non-commercial well, SAH-5, which was drilled during the period as part of the Morocco drilling campaign
The remaining expense of US$1.3 million relates to new business evaluation activities that occurred during the year ended 2020, and predominantly
relates to internal management costs.
In the prior year, US$5.1 million of expense related to the write-off of capitalised expenditure on the South Ramadan asset, US$3.7 million of
expenditure on the 2018/19 South Disouq 3D seismic was written off, and US$1.5 million of dry-hole costs for the CGD-15 well in Morocco
were expensed. The remaining expense of US$1.1 million was for new business evaluation activities.
Depletion, depreciation and amortisation
For the period ended 31 December 2020, depletion, depreciation, and amortisation (“DD&A”) amounted to US$25.2 million, compared to US$18.7 million
in the comparative period of the previous year. The variance is primarily the result of South Disouq coming on production from Q4 2019. Lower Morocco
DD&A was the result of an increase in reserves from the successful wells drilled in 2019 and early 2020.
Year ended 31 December
US$’000s 2020 2019
West Gharib 2,314 2,437
South Disouq 11,963 1,356
Morocco 10,147 13,752
Right of use assets 636 697
Other
132 435
Total DD&A 25,192 18,677
Please refer to note 9 in the Consolidated Financial Statements. The DD&A for right of use assets was recorded in line with IFRS 16. Please refer to note 22
in the Consolidated Financial Statements.
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Strategic Report
Financial Review
For the year ended 31 December 2020
Sources and uses of cash
The Company reported a cash position of US$10.1 million as at 31 December 2020, with an undrawn facility with EBRD amounting to US$2.5 million.
Agreement has been reached over a new facility with EBRD that will have a five-year term and US$10 million of availability once conditions precedent
are met. The existing facility will not be cancelled until this is the case.
The following table sets out the Company’s sources and uses of cash for the period ended 31 December 2020 and 2019:
Year ended 31 December
US$’000s 2020 2019
Sources
Operating cash flow of continuing operations before working capital movements 25,735 19,283
Operating cash flow from discontinued operations 2,445 12,957
Net proceeds from sale of assets 3,500 -
Dividends received 773 639
Effect of foreign exchange on cash and cash equivalents 369 381
Total sources 32,822 33,260
Uses
Changes in non-cash working capital (3,273) (5,867)
Property, plant and equipment expenditures (18,188) (24,777)
Property, plant and equipment expenditures on discontinued operations - (2,892)
Exploration and evaluation expenditures (10,333) (3,647)
Payments of lease liabilities (636) (795)
Finance costs paid (269) (267)
Income taxes paid (1,121) (1,306)
Total uses (33,820) (39,551)
Decrease in cash (998) (6,291)
Cash and cash equivalents at beginning of period 11,054 17,345
Cash and cash equivalents at end of period 10,056 11,054
Non-IFRS measures
The Financial Review contains the terms “netback” and “EBITDAX”, which are not recognised measures under IFRS. The Company uses these measures
to help evaluate its performance.
Netback
Netback is a non-IFRS measure that represents sales net of all operating expenses and government royalties. Management believes netback to be a useful
supplemental measure to analyse operating performance and provide an indication of the results generated by the Company’s principal business activities
prior to the consideration of other income and expenses. Management considers netback an important measure because it demonstrates the Company’s
profitability relative to current commodity prices. Netback may not be comparable to similar measures other companies use.
EBITDAX
EBITDAX is a non-IFRS measure that represents earnings before interest, tax, depreciation, amortisation, exploration expense, and impairment, which
is operating income/(loss) adjusted for the add-back of depreciation and amortisation, exploration expense, and impairment of property, plant, and
equipment (if applicable). EBITDAX is presented so that users of the financial statements can understand the cash profitability of the Company, excluding
the impact of costs attributable to exploration activity, which tend to be one-off in nature, and the non-cash costs relating to depreciation, amortisation,
and impairments. EBITDAX may not be comparable to similar measures other companies use.
28 / SDX Energy Plc / 2020 Annual Report & Accounts
Summary of quarterly results
Fiscal year 2020 2019
Financial US$’000s Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
Cash, beginning of period 11,054 9,275 8,807 11,054 12,587 11,195 11,354 17,345
Cash, end of period 10,056 11,054 9,275 8,807 11,054 12,587 11,195 11,354
Net revenue 12,532 11,586 9,163 12,787 11,163 7,740 8,356 7,563
Comprehensive income/(loss) 149 1,747 (801) (3,153) (18,162) 333 (489) 132
Net income/(loss) per share-basic 0.001 0.009 (0.004) (0.015) (0.089) 0.002 (0.002) 0.001
Capital expenditure 2,672 2,689 3,840 15,533 16,444 4,728 8,777 13,041
Total assets 124,603 127,611 129,231 135,648 133,018 139,542 140,122 137,630
Shareholders’ equity 96,342 96,452 94,390 95,123 98,031 115,806 115,346 116,491
Common shares outstanding (000’s) 205,378 205,378 204,723 204,723 204,723 204,723 204,723 204,723
Fiscal year 2020 2019
Operational Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
NW Gemsa sales (bbl/d)(1) - - - 1,538 1,216 1,354 1,326 1,586
West Gharib production service fee (bbl/d) 589 623 628 666 738 798 818 826
South Disouq gas sales (boe/d) 3,790 4,246 4,401 4,713 2,375 - - -
Morocco gas sales (boe/d) 1,038 792 551 863 890 827 729 761
Other products sales (boe/d) 242 323 318 282 502 448 493 542
Total boe/d 5,659 5,984 5,898 8,062 5,721 3,427 3,366 3,715
NW Gemsa sales volumes (bbls)b(1) - - - 139,949 111,902 124,576 120,624 142,768
West Gharib production service fee volumes (bbls) 54,159 57,309 57,166 60,641 67,855 73,445 74,475 74,315
South Disouq gas sales (boe) 348,698 390,609 400,525 428,903 218,535 - - -
Morocco gas sales volumes (boe) 95,508 72,877 50,116 78,525 81,887 76,039 66,358 68,458
Other products sales volumes (boe) 22,308 29,722 28,935 25,658 46,202 41,212 44,875 48,791
Total sales and service fee volumes (boe) 520,673 550,517 536,742 733,676 526,381 315,272 306,332 334,332
(1) Until 31 December 2019, NW Gemsa sales of gas, condensate and NGLs were reported in other product sales. Sales of these products made in Q1 2020 were reported with NW Gemsa sales.
Selected annual information
Year ended 31 December
US$’000s 2020 2019 2018
Total net revenue 46,068 34,822 28,465
(Loss)/profit and total comprehensive (loss)/income for the year ended (2,058) (18,186) 112
Net (loss)/income per share
Basic
$(0.010) $(0.089) $(0.001)
Diluted $(0.010) $(0.089) $(0.001)
Total assets 124,603 133,018 138,107
Total non-current liabilities 7,112 6,698 4,572
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Chief Financial Officer and Director
19 March 2021
SDX Energy Plc / 2020 Annual Report & Accounts / 29
Strategic Report
Principal Risks & Uncertainties
SDX continuously monitors and assesses its risks across the organisation. Risk registers are maintained at the group, country and project level. At the
group level, each risk is managed by a member of the Executive Committee, and owned by either an Executive Director, or the Board, as appropriate.
The current principal risks and their mitigations are set out below:
Risk
Mitigation
Investment returns
Insufficient liquidity to ensure the business
remains a going concern/funded for
planned activity
• An effective cash forecasting process is established and maintained. Management
undertakes severe but plausible downside analysis.
• Receivables are collected on a timely basis.
• Relationships with lenders are maintained and/new relationships are formed, if necessary.
• There is effective working capital management.
• Effective contracting processes are established and maintained.
Material reduction in oil prices
• SDX currently has a low portfolio exposure to the oil price as gas sold from South Disouq
and in Morocco is on long-term, fixed-price contracts.
Loss of support of major shareholder(s)
• Management and the Board maintain an agreed dialogue with key shareholders, the largest
of which has the right to appoint a Non-Executive Director to the Company’s Board.
• The Company aims to deliver on its strategy.
• Management seeks to ensure that shareholders’ investments generate adequate returns.
Operations and HSE
Major operational incident
• The SDX safety management system is implemented.
• Key process safety metrics are measured.
• Regular inspections of non-operated assets are carried out.
• Insurance is procured to address insurable risks.
Failure of exploration and development
strategy
• Robust G&G resources and a process for evaluating exploration and development
opportunities are put in place.
• The Company only works with reputable outsourced drilling contractors/service providers.
• Strategy does not require SDX to be a world-class explorer.
Unable to achieve production
targets/recover reserves
• A field development planning process is established.
• Production reports are produced on a timely basis.
• A maintenance and operability process is established.
• A reservoir management process is established.
• Adequate human/technical resources are in place within the organisation.
Terrorism & sabotage
• Develop and implement the SDX security system (in conjunction with expert third party).
• Specialist terrorism and sabotage insurance cover is maintained.
Political and commercial environment
Political stability in asset geographies leads
to loss of ability to operate effectively
• Capital allocation is carried out in relation to the perceived country risk.
• Management teams across the business carry out passive monitoring.
• The company develops and maintains strong in-country relationships with the authorities.
Non-compliance with laws and regulations
• A fully communicated and embedded ABC policy and Code of Conduct is established
and maintained.
• Annual ABC training, with written confirmations from recipients, takes place.
• Appropriate tone at the top
30 / SDX Energy Plc / 2020 Annual Report & Accounts
Strategic Report
SDX Energy Plc Directors’ S.172 Statement
SDX Energy maintains high operating standards, with a clear focus on health, safety, and the environment to ensure the safety of its employees, local
communities, and the environment in which the Company operates.
The Board of Directors of SDX Energy recognises the importance of building and sustaining relationships with stakeholders, considering the long-term
consequences of our decisions, and the need to foster a sound business reputation. The Board of Directors believes that all stakeholders must be treated
with fairness and respect, and has identified the following groups as being important to our success:
• Employees
• Shareholders
• Communities local to where we work
• National and local governments and regulatory agencies
• Asset partners
• Suppliers
• Financial institutions
The following chart sets out the responsibilities of each of the above stakeholder groups and the methods by which we engage with them, as overseen by
the Board as a whole:
Stakeholder
Internal responsibility
Communication channels
Issues typically considered
Employees
Chief Executive
Shareholders
Chairman of the Board and Chief
Executive Officer
Communities local to where
we work
Country managers
Email
Telephone and videoconferences
Town hall meetings
E-mail
Telephone and videoconferences
Face-to-face meetings
RNS announcements
Investor conferences
Website
Annual and interim reporting
Via third party advisors including
brokers
Training and development
HR policies and procedures
Health and safety
Anti-bribery and corruption
corporate initiatives
Investment returns
Operational and financial
performance
Strategy
Funding
Risk management
Face-to-face meetings
Public meetings
Email
Telephone
Environmental management
Social development initiatives
Community health
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governments and regulatory
agencies
Country managers
Face-to-face meetings
Email
Telephone
Written communications
Asset management
Environmental compliance
Social investment
Cash collections
Asset partners
Chief Executive Officer & Country
Managers
Face to face meetings
Email
Telephone
Written communications
Operational planning and
performance
Billing and cash calling
Asset development planning
Suppliers
Chief Executive Officer & Country
Managers
Telephone
Email
Face-to-face meetings
Financial institutions
Chief Financial Officer
Telephone
Email
Face-to-face meetings
Operations
Funding
Funding
SDX Energy Plc / 2020 Annual Report & Accounts / 31
Strategic Report
SDX Energy Plc Directors’ S.172 Statement
continued
Shareholders
The Board places equal importance on all shareholders and recognises the significance of transparent and effective communications with shareholders.
The primary communication tool with our shareholders is through the Regulatory News Service, (“RNS”) on regulatory matters and matters of material
substance. The Company’s website provides details of the company, its operations, corporate presentations, AIM rule 26 information, and QCA code
disclosures.
The Company’s annual report and Notice of Annual General Meetings (“AGM”) are available to all shareholders. Unfortunately, due to UK government
guidelines during 2020, our shareholders were asked not to attend our most recent AGM, but we look forward to welcoming participants when it is next
possible.
During 2020, investor events were held to enable a dialogue with the Executive Directors and other members of management. We delivered on our
commitment to hold at least two conference calls specifically for retail investors and, in addition to the quarterly operating and financial results forums,
we arranged a virtual Capital Markets Event in November.
By providing a variety of ways to communicate with investors, the Company feels that it reaches out to engage with a wide range of its stakeholders.
Employees
The Board regularly engages with its employees. Management holds frequent ‘town hall’ meetings with staff in the UK, Egypt, and Morocco. It seeks
to hold at least one scheduled board meeting annually in Cairo or Rabat, in addition to meetings in London. During these Board visits, time is set aside
to meet with local employees to communicate key messages and receive feedback.
Communities local to where we work
The Board has overseen the Company’s environmental, social, and governance initiatives during the year, which are discussed in more detail in the
2020 ESG report on pages 33 to 35 of the annual report.
Financial institutions (Lenders)
As detailed in the 2020 Financial Review, the Board has renewed its relationship with EBRD through the agreement of a new, five-year reserves-based
lending facility. It will replace the existing facility with EBRD and re-establish US$10 million of availability once customer conditions precedent are met.
The Board seeks to ensure at all times that the Company is fully funded for all planned activities and regards EBRD as a highly valued partner for SDX Energy.
Suppliers
The Board fully supports collaboration with suppliers as it reduces risk in our supply chain and ensures that we maintain high standards of business
conduct, which benefit our communities. We interact with suppliers during day-to-day field operations, major and smaller scale projects, tendering
exercises, and in planning future activity. In 2020, our suppliers successfully helped us to deliver our South Disouq and Morocco drilling campaigns,
tie-in our SD-12X discovery well, and connect a number of wells in Morocco, all while dealing with the challenges that COVID-19 has posed.
The Board also aims to foster productive relationships with our asset partners. Throughout 2020 the Board has worked to achieve the goals established
within each partnership, primarily set in Operating and Technical Committee meetings and updated as necessary through frequent communications.
National and local governments and regulatory agencies
The Board understands the importance of strong relationships with our host national and local governments. Respecting our agreements with the
Egyptian and Moroccan states is at the heart of our licence to operate, and we engage in regular discussions with government representatives to ensure
that expectations are understood and assets are managed effectively. We acknowledge that our responsibility includes adhering to local environmental
and social regulations, which in 2020 included conducting environmental impact assessments ahead of drilling in Morocco and Egypt, produced water
management in Morocco and at South Disouq, and land use rental and farmers’ compensation at the South Disouq asset.
32 / SDX Energy Plc / 2020 Annual Report & Accounts
Strategic Report
ESG Report
SDX’s purpose is to supply energy in an environmentally conscious manner
to the benefit of all its stakeholders. As an oil and gas exploration and
production company, we recognise our responsibilities to our investors,
the environment, particularly in the countries in which we operate, local
communities affected by our business, our employees, host governments,
and all our other business partners.
Our 2019 annual report featured our inaugural reporting on ESG. In it,
SDX committed to measure and report key ESG metrics to be able to
provide stakeholders with information about our ESG performance on an
annual basis. During 2020, several reporting frameworks were considered
and the Company has adopted elements of the Sustainability Accounting
Standard Board (“SASB”) framework. Metrics reported are calculated in
accordance with methodologies set out in the SASB standards.
Materiality assessment
SDX has undertaken a materiality assessment and mapping exercise
to SDX has undertaken a materiality assessment and mapping exercise
to rank ESG topics according to their significance to our business and
stakeholders. Material topics were those considered to be financially
material or that may reasonably be considered important for reflecting
the organisation’s economic, environmental, and social impacts, or that
could influence the decisions of stakeholders.
The following ESG topics were identified as material to SDX:
• Greenhouse gas emissions
• Water and wastewater management
• Ecological impacts
• Health and safety
• Business ethics
• Critical incident risk management and systemic risk management
• Employee engagement, diversity, and inclusion
• Human rights, labour practices, and community relations
Reporting boundaries
The ESG reporting boundary for this report is SDX’s operated assets and
office locations. Non-operated assets are currently outside the reporting
boundary for these reasons:
• It is not yet possible to gain sufficient assurance over the accuracy and
completeness of data from non-operated assets across all ESG topics;
and
• Non-operated assets are less material. As at 31 December 2020, non-
operated assets (West Gharib) accounted for 10% of Group working
interest production, 10% of Group netback, and 5% of Group assets.
Greenhouse gas emissions
FY2020 scope 1 greenhouse gas emissions in Morocco were 869 tons
of CO2e, and at South Disouq, 5,830 tons of CO2e. The carbon intensity
of the operations was 2.2kgCO2e/boe and 1.8kgCO2e/boe, respectively.
Both operations compare favourably to peers and the wider industry.
The Morocco operation is characterised by a simple process whereby the
only treatment of the natural gas is separation of produced water before
it is flowed into our pipeline and distribution network. At South Disouq,
produced natural gas is used as the primary fuel for the CPF, which was
constructed and assembled in 2019 and incorporates the latest energy-
efficient technologies.
In Morocco, scope 3 emissions at our eight industrial customers consisted
of 113,000 tons of CO2e in 2020. However, given that these factories
would otherwise consume more polluting fuels, the company’s supply of
natural gas reduced our customers’ CO2 emissions by 57,000 tons of CO2e
during the year versus heavy fuel oil.
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CO2e emissions reduced vs fuel oil (tons of CO2e)
Cum. CO2e emissions reduced (tons of CO2e)
Note-emission reductions assume alternative fuel is heavy fuel oil
Water and wastewater management
Produced water is a natural by-product of oil and gas production.
Untreated, produced water can be harmful to the environment.
SDX operates assets located in agricultural areas and ensures that
there is no discharge of produced water into the environment.
In Morocco, all produced water is transferred to lined pits and naturally
evaporates. At South Disouq, produced water is first stored in bunded
tanks at the CPF and then is trucked offsite for treatment and recycling.
No water is injected or discharged at either operation.
Ecological impacts
As noted above, due to the sensitivity of the location of our operations,
the company takes appropriate steps to mitigate the risk of hydrocarbon
spills. Morocco does not produce liquid hydrocarbons, and at South Disouq
the condensate tanks are newly commissioned with strict protocols in place
to prevent spills, such as when loading road tankers. These operations take
place in bunded areas to reduce environmental contamination risk.
There were no hydrocarbon spills at either operation during 2020.
SDX Energy Plc / 2020 Annual Report & Accounts / 33
Strategic Report
ESG Report
continued
Energy
efficient
technologies
34 / SDX Energy Plc / 2020 Annual Report & Accounts
Health and safety
SDX is committed to protecting the safety of its employees, contractors,
and the communities in which it operates.
Regrettably, there was one minor Lost Time Injury (“LTI”) at South Disouq
during 2020 in which a contractor was injured but returned to work after
three days. SDX immediately conducted an incident report and lessons
learned exercise. The safety management system was modified to ensure
that a similar incident will not occur in future. This LTI was the first to be
recorded by SDX Energy.
There were no recordable injuries in Morocco.
Employee engagement, diversity and inclusion
SDX is committed to providing equal opportunities to all employees.
Employees receive equal treatment regardless of:
• Age
• Disability
• Gender reassignment
• Marital or civil partner status
• Pregnancy, maternity or paternity
• Race
• Colour
• Nationality, ethnic, or national origin
• Sex or sexual orientation
Business ethics
Peace, stability, human rights, and effective governance based on the rule
of law are important conduits of sustainable development. SDX conducts
its business in a fair and transparent manner, empowering our employees
to adhere to the required standards of practice, wherever our business
takes us.
SDX has in place the following codes, policies and procedures that seek
to address ethical matters:
• Code of business conduct
• Anti-bribery and corruption policy
• Whistleblowing procedures
• Privacy notices and personal data protection (GDPR Compliance)
These policies are distributed to all employees.
None of the SDX’s oil and gas reserves are in countries within the 20 lowest
rankings in Transparency International’s Corruption Perception Index (CPI).
Critical incident risk management and systemic risk management
Risk management and mitigation is a key tenet in SDX’s operating
philosophy. We have embedded a risk process that runs from the
operations teams in the field through to senior management and board
levels. The foundation of this process is risk identification and assessment
through tools such as safety analysis, project risk assessment, and business
risk planning. A regular review process ensures that these risks are
mitigated and remain evergreen. Risks that are material to the Company
overall are reviewed at the executive committee level and are approved
by the CEO and the remainder of the board.
We also believe in the importance of promoting diversity and equality,
which are essential to create a rich mix of skills and abilities across the
business. We are proud of the composition of our team and were pleased
to welcome Catherine Stalker to the Board as a Non-Executive Director
in February 2020. Across the business, 15% of our employees are female,
including the senior reservoir engineer, senior geologist, and Group
financial reporting manager in London, the head of exploration and
business development in Cairo, and the head of legal and HR in Rabat.
Human rights, labour practices and community relations
SDX respects the human rights of all our employees, contractors,
and those within our supply chain. We have a zero-tolerance approach to
human rights abuse and modern slavery and seek to operate in accordance
with all applicable UK, Egyptian, and Moroccan human rights rules and
labour laws. SDX works exclusively with reputable local and international
contractors and conducts industry-standard tender exercises for all
significant projects.
SDX contributes to the economic and social development of our countries
of operation by creating meaningful partnerships to ensure that our
operations align with local priorities and business cultures. Wherever
possible, we employ and nurture local talent. Of our 51 permanent salaried
roles across Egypt and Morocco, we are proud that 50 (98%) are filled by
national citizens. We also use domestic suppliers and contractors at our
operating sites whenever possible.
SDX proactively engages with the local communities that are affected
by our operations and strive to be of benefit to them. While our ability
to undertake community initiatives in Egypt and Morocco was limited
by the restrictions put in place to counter the COVID-19 pandemic,
our teams remain mandated to seek out opportunities, with a focus
on health care and education.
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Corporate Governance
Our Focus /
Middle East &
North Africa
36 / SDX Energy Plc / 2020 Annual Report & Accounts
Corporate Governance
Page title
Corporate Governance
Board of Directors 38
Chairman’s Introduction to Corporate Governance 40
Statement of Corporate Governance 41
Directors’ Report 43
QCA Code Compliance Disclosures 44
Remuneration Committee Report 50
Nomination Committee Report 54
Audit Committee Report 55
Reserves Committee Report 56
Statement of Directors’ Responsibilities 57
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SDX Energy Plc / 2020 Annual Report & Accounts / 37
Corporate Governance
Board of Directors
Executive Directors
Non-Executive Directors
Mark Reid
Chief Executive Officer and Director
Michael Doyle
Non-Executive Chairman
Mr. Reid has over 20 years’ experience in numerous sectors, including the
financial services, investment banking, and oil and gas. He has had significant
exposure to M&A transactions and the equity and debt capital markets.
Between 2009 and 2015 he was Finance Director at the AIM-listed Aurelian Oil
and Gas Plc and Chariot Oil and Gas Limited. Prior to this, he spent seven years
as an emerging markets E&P banker and was head of oil and gas in the London
office of BNP Paribas Fortis. He also spent seven years with Ernst & Young
Corporate Finance advising on M&A, IPO, and other fundraising transactions.
Mr. Reid has an MBA (Distinction) from Strathclyde University. He is a Member
of the Institute of Chartered Accountants of Scotland, a Fellow of the
Chartered Association of Certified Accountants, and a Member of the Chartered
Institute for Securities and Investment.
Mr Doyle is a Professional Geophysicist and a Certified Corporate Director with
more than 35 years of industry experience. He is a principal of privately-held
CanPetro International Ltd. and its affiliates and has been a director of Equal
Energy Ltd. since 1997. Mr. Doyle was a founding director and chairman of
Madison PetroGas in 2003.
Mr. Doyle was previously a principal and Chief Executive Officer of Petrel
Robertson Ltd., where he was responsible for providing advice and project
management to clients throughout the world. Prior to that role, he held a
variety of exploration positions at Dome Petroleum and Amoco Canada.
Mr. Doyle holds a Bachelor of Science (Maths and Physics) from the
University of Victoria.
Nicholas Box
Chief Financial Officer and Director
David Mitchell
Non-Executive Director
Mr. Box was appointed chief financial officer and director of SDX Energy Plc in
November 2019. He is a Chartered Accountant and a Fellow of the Institute of
Chartered Accountants in England and Wales. Prior to joining SDX Energy Plc
as Group Financial Controller in 2016, Mr. Box worked for PwC in the UK,
Australia, and Mongolia, primarily in the natural resources sector. He has over
14 years of professional experience in accounting, capital markets transactions,
post-merger integrations, and internal controls.
Mr. Mitchell is an international oil and gas executive with more than 35 years
of experience, including with BP and Nexen. He was CEO of Madison PetroGas
and built the company prior to the merger with Sea Dragon Energy.
Mr. Mitchell built projects with teams in the Middle East, West Africa, Latin
America, and the North Sea. He has lived and worked in several countries,
including a year in Egypt with BP. Mr. Mitchell received his BSc Honours degree
in, Geology from the University of London and his Mhil Mining Engineering
from the University of Nottingham, UK.
Mr Mitchell was appointed CEO of Madison PetroGas on joining in 2008,
building the company prior to the merger with Sea Dragon Energy.
38 / SDX Energy Plc / 2020 Annual Report & Accounts
Corporate Governance
Page title
Timothy Linacre
Non-Executive Director
Catherine Stalker
Non-Executive Director
Mr. Linacre is a Fellow of the Institute of Chartered Accountants in England and
Wales and an experienced City practitioner. After qualifying with Deloitte
Haskins and Sells he spent 5 years with Hoare Govett. He moved to Panmure
Gordon in 1992, where he worked for 20 years, including eight years as CEO.
Mr. Linacre is currently Senior Managing Partner at Instinctif Partners, a leading
business communications firm.
During his career in the City Mr. Linacre has advised a range of businesses
in a variety of numerous sectors, including oil and gas, from FTSE 100
companies to fast-growing listed and private companies.
Ms. Stalker is an experienced non-executive director and consultant to the
boards of FTSE companies, public sector bodies, regulators, pension funds,
and not-for-profits. She has worked at the Bank of England, and at PwC in
Moscow and Berlin, where she headed the HR consulting practice. She is
currently a partner at Independent Audit Limited, a leading board evaluation
firm with offices in London, Brussels, and Dublin. Ms. Stalker sits on the boards
of two subsidiaries of DTEK, a Dutch energy company with vertically integrated
assets in Ukraine. She is also a non-executive director on the Board of the
Ukrainian retail bank, PUMB.
Ms. Stalker holds an MSc from the London School of Economics in
International Political Economy and a BA (Honours) from Heriot Watt
University in Russian and French.
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Non-Executive Director
Mr Al Menhali has a track record of over 20 years in the financial services industry
in a variety of leadership positions, including as former CEO of Waha Capital PJSC
and his prior role as the CEO of one of the leading banks in the UAE.
During his career, he has developed strong leadership skills and expertise in
strategy, finance, risk, credit and corporate governance. In his previous roles,
he has led several strategic transformation projects, building high performance
businesses to achieve sustainable growth.
Mr Al Menhali currently sits on the boards of several local and international
companies in diverse sectors. He holds a Bachelor’s Degree, with Honours,
in Business Administration, and also completed the General Management
Program at Harvard Business School in Boston.
SDX Energy Plc / 2020 Annual Report & Accounts / 39
Corporate Governance
Chairman’s Introduction to
Corporate Governance
The board seeks to embed
good corporate governance
throughout the business,
from the executive level to
in-country operations.
As Chairman of SDX Energy Plc, I am committed
to ensuring that an effective and focused board
of directors leads the business and continues its
track record of delivery. Strong corporate
governance helps to underpin the foundations
of a solid and successful business.
The board seeks to embed good corporate
governance throughout the business, from
the executive level to in-country operations.
In 2020, following our re-domicile from Canada
to the United Kingdom, we adopted the Quoted
Companies Alliance Corporate Governance Code
2018 (the “Code”) after transitioning from its
Canadian equivalent. My fellow directors and
I believe that, in becoming a UK Plc, the Code
is the most appropriate recognised framework
for the Company, and this is discussed in more
detail in our annual Code disclosures on pages
44 to 49.
As we reflect on the successes and challenges
of 2020, I look forward to continuing to build
upon the existing values we have in place and
to ensuring that sound corporate governance
supports our growth for the benefit of all
stakeholders.
Michael Doyle
Non-Executive Chairman
19 March 2021
40 / SDX Energy Plc / 2020 Annual Report & Accounts
Corporate Governance
Statement of Corporate Governance
Board composition
Catherine Stalker was appointed to the Board in February 2020
as an independent Non-Executive Director, and named Chair of the
Remuneration and Nominations committees. The Board was delighted
to welcome Catherine, particularly given her background in governance
and energy.
There is a clearly defined organisational structure with lines of
responsibility and delegation of authority to the executive management.
The Board is responsible for monitoring the activities of the executive
management. The Chairman is responsible for ensuring that the Board
discharges its responsibilities. In the event of a tied vote at a meeting of
the Board, the Chairman has a second or casting vote.
As at 31 December 2020, the Board of the Company consisted of the
Non-Executive Chairman, the Chief Executive Officer, the Chief Financial
Officer, and four Non-Executive Directors. All the non-Executive directors
are independent in character and judgement and have the range of
experience and expertise to bring independent judgement on issues
of strategy, performance, resources, and standards of conduct, which
is vital to the success of the Group.
The Board believes there is an adequate balance between the
Non-Executive and Executive directors, both in number and in
experience and expertise, to ensure that the Board operates independently
of executive management. During 2020 a Board performance evaluation
was undertaken, as discussed below.
Corporate governance framework
The Board of Directors recognises that good corporate governance is of
fundamental importance to the success of the Company and believes that
the QCA Code provides the Company with the right framework to sustain
a strong level of governance. The annual QCA Code disclosures are
contained on pages 44 to 49 of the annual report.
The Board holds scheduled meetings each year. Additional meetings are
held when necessary to consider matters of importance that cannot be
held over until the next scheduled meeting. At these meetings, financial,
operational, and other reports are considered and, where appropriate,
voted on. The Board is responsible for the Group’s strategy, performance,
key financial and compliance issues, approval of all annual budgets, and
the framework of internal controls. The matters reserved for the Board
include, among others, approval of the Group’s strategy and annual
objectives, monitoring compliance with significant policies and procedures
including health and safety, oversight of communications and public
disclosure, approval of the Group’s annual report and accounts, succession
planning, and the maintenance of sound systems of internal control.
The Board delegates certain of its responsibilities to the Board committees,
detailed below, which have clearly defined terms of reference.
The Company is committed to a corporate culture that is based on sound
ethical values and behaviours and it seeks to instil these values across the
organisation. The Company promotes its commitment through its public
statements on its website, in its report and accounts, and internally
through its communications to employees and other stakeholders.
The Company has a zero-tolerance approach to bribery and corruption
and has adopted an anti-bribery policy to protect the Group, its
employees, and those third parties with which the Company engages.
Annual training sessions are held with all employees to ensure compliance
with the anti-bribery policy.
The Company has adopted a whistleblowing policy which enables
employees to raise any concerns they may have in confidence with
the Chairman, CEO or the Chair of the Audit Committee.
Board Committees and Structure
The Board has established an Audit Committee, a Reserves Committee,
a Nominations Committee, and a Remuneration Committee. Health, safety,
and environmental matters are within the remit of the full Board.
All committees report back to the Board following a committee meeting.
Audit Committee
The Audit Committee meets regularly and consists of three members,
all of whom are Non-Executive Directors. Its purpose is to help the board
oversee the integrity of the financial statements and other financial
reporting, the application of significant accounting policies,
the effectiveness of financial and internal controls, and the independence
and performance of the auditors, including the provision of non-audit
services. The Audit Committee may hold private sessions with management
and with the external auditor without management present.
The Audit Committee met four times in 2020 and proposes to meet at
least four times during the next financial year. It is chaired by Tim Linacre
and the other members are Michael Doyle and Amr Al Menhali.
Reserves Committee
The Reserves Committee meets at least annually and consists of two
members, both of whom are Non-Executive Directors. Its purpose is
to review the reports of the independent reserves auditors pursuant to
Canadian regulations, which require that the board discuss the reserves
reports with the independent reserves auditors or delegate authority to
a reserves committee comprised of at least two non-Executive Directors.
David Mitchell chairs the Reserves Committee and the other member is
Michael Doyle. The committee met once in 2020 and typically meets
once a year prior to publication of the annual results.
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SDX Energy Plc / 2020 Annual Report & Accounts / 41
Corporate Governance
Statement of Corporate Governance
continued
Board Committees and Structure (continued)
Remuneration Committee
The Remuneration Committee meets regularly to consider all material
elements of remuneration policy, share schemes, and the remuneration
and incentivisation of Executive Directors and senior management. Its role
is to monitor and review remuneration policies to ensure that SDX attracts,
retains, and motivates the most qualified talent who will contribute to the
long-term success of the Company. The committee met three times in
2020 and proposes to meet at least twice during the next financial year.
The committee is composed of three non-Executive Directors, two of
whom are independent. The committee is chaired by Catherine Stalker
and the other members are Tim Linacre and Amr Al Menhali.
Nominations Committee
The Nominations Committee was created in 2020 as a standing committee
of the Board It is comprised of two independent Non-Executive Directors,
and three non-independent Non-Executive Directors. It oversees
succession planning, the structure, effectiveness, and performance of all
members of the Board and all Board committees, and the recruitment and
induction of directors.
The committee is currently comprised of Catherine Stalker (Chair), Michael
Doyle, Amr Al Menhali, Tim Linacre, and David Mitchell. The committee
held its inaugural meeting in 2020 and proposes to meet at least twice
during the next financial year.
Directors’ attendance at meetings
The Board generally has one scheduled Board meeting every quarter over
the course of the financial year with informal discussions scheduled as
required. Additional meetings are held from time to time to deal with
issues that arise. The Non-Executive Directors hold informal meetings
during the year at which members of management are not in attendance.
The Directors’ attendance at scheduled Board meetings and committees
during 2020 is detailed in the table below:
Board Evaluation
The Board considers that its effectiveness and the individual performance
of its directors is vital to the success of the Company.
A Board performance evaluation was carried out in 2020, led by the
Nominations Committee. The process and results are discussed in the
Nominations Committee report on page 54.
The directors have a wide knowledge of the Company’s business and
understand their duties as directors of a company quoted on AIM. They
have access to the Company’s Nominated Adviser, auditors, and legal
counsel as and when required. These advisers are available to provide
formal support and advice to the Board from time to time and do so in
accordance with good practice. The directors are also able, at the
Company’s expense, to obtain advice from external advisers, if required.
The Board is mindful of the need for succession planning and was
pleased to announce the appointment of Catherine Stalker in February
2020. The Board, supported by the Nominations Committee, will continue
to meet and monitor the requirements for succession planning and Board
appointments to ensure that the Board is fit for purpose. If external
training or assistance with recruitment is required by the Board, this will
be made available.
Mark Reid
Chief Executive Officer and Director
19 March 2021
Director(1) Board Audit Nominations(2) Remuneration(3) Reserves
Michael Doyle 4* 4 1 3+ 1
Mark Reid 4 4+ 1+ 3+ 1+
Nick Box 4 4+ 1+ 3+ -
Tim Linacre 4 4* 1 3 -
David Mitchell 4 4+ 1 3+ 1*
Amr Al Menhali (4) 1 1 - 1 -
Catherine Stalker (5) 4 4+ 1* 3* -
Total meetings 4 4 1 3 1
*
+
Chairman
Invitee
Notes:
(1) The Non-Executive Chairman, CEO, CFO, and Non-Executive Directors attended a number of meetings of Committees of which they were not members during the course of the year at the invitation of the Committee chairman.
(2) The nominations committee was established on 17 November 2020, with each Non-Executive Director a member and Catherine Stalker appointed as Chairman.
(3) Following her appointment as a Director in February 2020, Catherine Stalker was appointed Chairman of the remuneration committee.
(4) When Mr. Al Menhali was unable to attend a scheduled Board or committee meeting, a senior member of Waha Capital's management team attended as his representative.
(5) Catherine Stalker was appointed as a Director on 6 February 2020.
42 / SDX Energy Plc / 2020 Annual Report & Accounts
Corporate Governance
Directors’ Report
The Directors of the Company present their report and the audited
Consolidated Financial Statements of SDX Energy plc (“SDX” or the
“Company”) for the year ended 31 December 2020.
Principal activities
The principal activity of the Company and its subsidiary undertakings (the
“Group”) is the exploration for and production of oil and gas. Its current
activities are located in the Arab Republic of Egypt and the Kingdom of
Morocco.
Business review and future developments
A review of the business and the future developments of the Group is
presented in the Strategic Report (including the Chief Executive Officer’s
Report, Review of Operations and Financial Review) and Chairman’s
Statement (all of which, together with the Corporate Governance
Statement, are incorporated by reference into this Directors’ Report).
Results and dividends
The loss for the year was US$2,058k (2019: loss of US$18,186k). The
Directors do not recommend the payment of a dividend (2019: US$nil).
Financial instruments
The Group’s financial risk management objectives and policies
are discussed in note 6 to the Consolidated Financial Statements.
Events since the balance sheet date
Events since the balance sheet date are disclosed in note 26
to the Consolidated Financial Statements.
Directors and their interests
The Company was incorporated on 20 March 2019. As described in note 1
to the Consolidated Financial Statements on 28 May 2019, the Company
obtained control of the entire issued share capital of SDX Energy Inc. via a
share-for-share exchange.
The following Directors have held office in the Company during the year
and to the date of this report:
Mark Reid (appointed 20 March 2019)
Michael Doyle (appointed 28 May 2019)
Timothy Linacre (appointed 28 May 2019)
David Mitchell (appointed 28 May 2019)
Nicholas Box (appointed 12 November 2019)
Amr Al Menhali (appointed 20 November 2019)
Catherine Stalker (appointed 6 February 2020)
The Directors who held office at the end of the financial year had the
following interests in the ordinary shares of the Company according to the
register of Directors’ interests:
Interest
Interest at at date of
Director Class of share end of year appointment
Michael Doyle Ordinary 2,169,669 2,169,669
Mark Reid Ordinary 692,897 366,970
Nick Box Ordinary 97,261 20,030
Tim Linacre Ordinary 160,000 50,000
David Mitchell Ordinary 1,809,450 1,671,950
Amr Al Menhali(1) Ordinary 39,876,803 39,876,803
Catherine Stalker Ordinary 111,359 -
(1) Amr Al Menhali, the former CEO of Waha Capital PJSC, is the shareholder representative of Waha Capital
PJSC. Waha Capital PJSC, through its wholly-owned subsidiary SDX SPV Ltd., owns 39,876,803 ordinary
shares in the Company although Mr. Al Menhali owned no ordinary shares in the Company in a personal
capacity at the end of the year or at the date of his appointment.
None of the Directors who held office at the end of the financial year
had any disclosable interest in the shares of other Group companies.
During the financial year, Mark Reid and Nick Box were both granted
rights to subscribe for shares in the Company as part of the Company’s
Long Term Incentive Plan. Mr. Reid and Mr. Box were also awarded shares
in the Company during 2020 as a component of the 2019 bonus. Details
of these awards is given in the 2020 Remuneration Report on pages 50 to
53 of the Annual Report. Neither Mr. Reid nor Mr. Box exercised rights to
subscribe for shares in the Company during the financial year.
No rights to subscribe for shares in, or debentures of, Group companies
were granted to any of the other Directors or their immediate families, or
exercised by them, during the financial year. Rights to subscribe for shares
held by Directors are disclosed in note 16 to the Consolidated Financial
Statements and in the 2020 Remuneration Report on pages 50 to 53 of
the Annual Report.
Auditor
A resolution to reappoint PricewaterhouseCoopers LLP as auditor will
be put to the members at the annual general meeting.
Disclosure of information to auditors
The directors who were members of the Board at the time of approving
the Directors’ Report are listed above. So far as each person who was a
director at the date of approving this report is aware, there is no relevant
audit information, being information needed by the auditors in connection
with preparing its report, of which the auditors are unaware. Having made
enquiries of fellow directors and the Group’s auditors, each director has
taken all the steps that he or she is obliged to take as a director in order
to make him or herself aware of any relevant audit information and to
establish that the auditors are aware of that information.
On behalf of the Board
Mark Reid
Chief Executive Officer and Director
19 March 2021
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SDX Energy Plc / 2020 Annual Report & Accounts / 43
Corporate Governance
QCA Code Compliance Disclosures
Principle 1: Establish a strategy and business model which promote long-term value for shareholders
Explain the Company’s business model and strategy, including key challenges in their execution (and how those will be addressed)
The Company’s strategy is to develop and maintain a portfolio of onshore/near-shore oil and gas exploration and production assets in the MENA
region that deliver high-margin production, such that SDX would generate, on average, US$15/boe in operating profit in any price environment.
As the Company operates in the upstream oil and gas sector, it is exposed to political, operational, commercial, product pricing, and hazard risk.
Further discussion of the Company’s business model, strategy, and key challenges is contained within the Strategic Report on pages 6 to 35.
Principle 2: Seek to understand and meet shareholder needs and expectations
Explain the ways in which the Company seeks to engage with shareholders. This should include information on those responsible for
shareholder liaison or specification of the points of contact for such matters
The Company engages with its shareholders through regulatory news flow, providing statutory financial results, operational and financial updates
to maintain information on overall performance, releases relating to matters of material importance to the Company’s business, releases of a regulatory
nature, and scheduled events such as capital markets days. The Company maintains an informative and regularly updated website at
www.sdxenergy.com through which shareholders can obtain copies of the Company’s annual reports, interim reports, and other regulatory documents
and regulatory news service releases. The website includes copies of all presentations made from time to time to analysts, shareholders, and the
general market. It also includes a facility under which shareholders may submit questions or make comments relating to the Company’s business.
Contact details for all regulatory announcements can be found on the website. Whenever possible, the Company endeavours to respond to enquiries.
Under normal circumstances, the Company’s Annual General Meeting (“AGM”) is a regular opportunity for shareholders to meet with the Company
and receive a corporate presentation. There is also an opportunity for shareholders to ask questions after the presentation, during the formal business
of the meeting, and informally following the meeting. In 2020, and in accordance with the then-prevailing UK Government requirements for people to
avoid both gatherings of more than two people who did not live together and all non-essential travel and social contact, shareholders were asked not
to attend the AGM. The Company will continue to observe applicable guidelines for the 2021 and future AGMs.
The Chairman and the CEO are together responsible for shareholder liaison and act as a listening board for shareholders. In all communications with
shareholders and the general market, the Company maintains strict compliance with the requirements of the AIM Rules and Market Abuse Regulations.
The Company also retains advisors, including public/investor relations and brokers, who maintain a regular dialogue with current and prospective
shareholders and inform management of relevant feedback and market perceptions of the Company.
44 / SDX Energy Plc / 2020 Annual Report & Accounts
Principle 3: Take into account wider stakeholder and social responsibilities and their implications for long-term success
Explain how the business model identifies the key resources and relationships on which the business relies
The Company’s business model and strategy are described in Principle 1.
The Company is aware of its stakeholder and social responsibilities and the need to maintain effective working relationships across a range
of stakeholder groups. These include the Company’s host governments, employees, joint venture and industry partners, suppliers, customers,
and regulatory authorities across the Company’s activities. These activities have the potential to affect local communities where our assets are located
and the environment more generally. Accordingly, the Company has in place positive strategies to engage with each stakeholder group, whether
individually or collectively, as part of its ongoing operations, including a comprehensive Environmental, Social and Governance (“ESG”) strategy,
which is outlined on pages 33 to 35 of this Annual Report.
The Company’s operations and working methodologies take account of the need to balance the needs of all stakeholder groups while maintaining
a primary focus on the promotion of the success of the Company for the benefit of all shareholders. A broad range of stakeholders, including our
supply chain partners, our employees, and taxing authorities benefit when the Group is successful.
Explain how the Company obtains feedback from stakeholders and the actions that have been generated as a result of this feedback
(e.g. changes to inputs or improvements in products)
The Company values the feedback received from its stakeholders and takes every opportunity to ensure that, where possible, the wishes of
stakeholders are considered. The operations of the Company need to be carefully managed and conducted in order to reduce environmental impact,
enhance (rather than impair) communities, and protect Company employees and others who operate at the Company’s assets.
As outlined in Principle 2, the Company maintains a regular dialogue with its shareholders through several channels.
The Company meets with its asset partners frequently, including at scheduled Technical and Operating Committee meetings. In-country personnel
lead the day-to-day management of the relationships with host governments, represented by ONHYM in Morocco and EGPC, EGAS and GPC in
Egypt. Plans and budgets presented to partners and host governments are updated in line with feedback received and, for example, may have an
impact on field development plans, production optimisation, JV organisation charts, etc.
The Company conducts regular employee engagement sessions, run by the executive team, at which employees are able to voice their opinions and
make suggestions.
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SDX Energy Plc / 2020 Annual Report & Accounts / 45
Corporate Governance
QCA Code Compliance Disclosures
continued
Principle 4: Embed effective risk management, considering both opportunities and threats, throughout the organisation
Describe how the board has embedded effective risk management in order to execute and deliver strategy. This should include a
description of what the board does to identify, assess and manage risk and how it gets assurance that the risk management and
related control systems in place are effective
A culture of risk awareness and management is encouraged at all levels throughout the Company. The board regularly reviews strategic risks. At the
Executive Committee level, each member of the team is responsible for continuously monitoring and managing risk within the relevant business areas.
Corporate, country, and project risk registers are maintained and monitored at the appropriate levels within the organisation. The Company employs
outside advisors to assess and advise on risk when it is felt that additional third-party expertise is required. By receiving frequent updates on
developments pertaining to the business and operations, the board maintains a full and active awareness of operational and financial risks and
the assurances that effective control systems are in place.
The Company maintains appropriate insurance cover in respect of its activities. The insured values and type of cover are comprehensively reviewed
on a periodic basis.
The Company’s approach to the management and identification of risk is set out in the Business Risks and Uncertainties section of the
Financial Review, contained in the 2020 annual report on page 30.
Principle 5: Maintain the board as a well-functioning, balanced team led by the chair
Identify those directors who are considered to be independent; where there are grounds to question the independence of a director,
through length of service or otherwise, this must be explained
The Board currently has a Non-Executive Chairman, a Chief Executive Officer (CEO), a Chief Financial Officer and four Non-Executive Directors.
The biography of each director is set out in the Annual Report on pages 38 to 39.
All Non-Executive Directors have extensive and complementary skills, knowledge, and experience, covering all facets of the business that require
both entrepreneurial and custodian oversight and all are considered independent in terms of character and judgement. The Board is aware of the need
to maintain and build upon this balance of backgrounds and to maintain a diversity of talent through succession planning as the Company continues
to develop and the needs of the business grow.
Michael Doyle and David Mitchell both hold shares and options in the Company in excess of 1% of the Company’s issued share capital.
Amr Al Menhali is the CEO of the Company’s largest shareholder, Waha Capital PSJC. As set out in the UK Corporate Governance Code,
these directors would not be considered independent, however, the board believes that each provides independent judgement and challenge.
The board considers Tim Linacre and Catherine Stalker to be Independent Directors. The Company is delighted that Mr. Linacre and Ms. Stalker
have decided to invest personal funds into ordinary shares in the Company. The Company believes that this investment demonstrates an alignment
of interests between these individuals as Non-Executive Directors and the Company. However, the size of these holdings represents less than 1% per
cent of the Company's issued share capital and therefore the Company does not consider the size of the holdings to compromise independence.
The Company thereby meets the QCA guidelines of having two Independent Non-Executive Directors.
Describe the time commitment required from directors (including non-executive directors as well as part-time executive directors)
The executive directors are expected to devote the whole of their working time to their duties with the Company. The non-executive Directors have
a lesser time commitment. It is anticipated that non-executive Directors will each dedicate 12 days a year to their duties as Board members.
Include the number of meetings of the board (and any committees) during the year, together with the attendance record of each director
Full details of the number of Board and Committee meetings held and the attendance record of each of the Directors is provided in the 2020 annual
report on page 42.
46 / SDX Energy Plc / 2020 Annual Report & Accounts
Principle 6: Ensure that between them the directors have the necessary up-to-date experience, skills and capabilities
Identify each director
Information on each of the Directors is provided in the 2020 annual report on pages 38 to 39.
Describe the relevant experience, skills and personal qualities and capabilities that each director brings to the board (a simple list
of current and past roles is insufficient); the statement should demonstrate how the board as a whole contains (or will contain)
the necessary mix of experience, skills, personal qualities (including gender balance) and capabilities to deliver the strategy of the
company for the benefit of the shareholders over the medium to long-term
The Board of Directors possess a wide range of experience and skills. To meet the requirements of an independent upstream oil and gas exploration,
development, and production company their experience and skills must cover financial, legal, operational, and technical knowledge of risk
management and growth in the independent sector and in public markets. Each of the directors on the Board, both executive and non-executive,
has considerable experience and all have skills which are complementary and sufficient to cover all the requirements of the Board. The composition
of the board is regularly reviewed to ensure that it has the necessary breadth and depth of skills to support the ongoing development of the Group
and the management team. The Company strives to maintain a diverse board. For a background history of each of the directors, please refer to pages
38 to 39 of the 2020 annual report.
Explain how each director keeps his/her skillset up to date
Board members have significant experience within the industry and in public and financial markets. The Board receives support and advice from its
Nomad on AIM requirements as and when required, and from other advisors (including legal counsel and the independent auditors) on developments
relevant to directors’ roles. Each director is also encouraged to discuss any matter of interest with the Company’s professional advisors, as needed.
Where the board or any committee has sought external advice on a significant matter, this must be described and explained
The Reserves Committee engages independent reserves auditors to provide an independent competent persons report on the Company’s end of year
reserves. The Remuneration Committee engages external advisors to provide external benchmarking for executive and non-executive remuneration.
Where external advisers to the board or any of its committees have been engaged, explain their role
Details of the Company’s advisors can be found on the website:
www.sdxenergy.com/investors/advisors/
Describe any internal advisory responsibilities, such as the roles performed by the company secretary and the senior independent
director, in advising and supporting the board
The directors have access to the Company’s Nomad, outsourced company secretary, lawyers, and auditors and can obtain advice from other external
bodies as and when required. The executive directors keep the Board up to date on areas of new governance and liaise with the Company’s lawyers
and Nomad on AIM requirements.
The Board does not currently consider it necessary to appoint a Senior Independent Director. The Chairman discusses matters arising with fellow
Non-Executive Directors and the group is available to hold discussions with shareholders, when necessary.
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SDX Energy Plc / 2020 Annual Report & Accounts / 47
Corporate Governance
QCA Code Compliance Disclosures
continued
Principle 7: Evaluate board performance based on clear and relevant objectives, seeking continuous improvement
Include a high-level explanation of the board performance effectiveness process
During 2019 the composition of the Board underwent a number of changes, including the appointment of a new CEO (Mark Reid, replacing
Paul Welch), new CFO (Nick Box, replacing Mark Reid), and the appointment of new major shareholder representative (Amr Al Menhali,
replacing Michael Raynes). Catherine Stalker was appointed to the Board in February 2020.
Following these changes, in late 2020 the Nominations Committee carried out a Board performance review, the results of which were evaluated
in 2021. This exercise was conducted internally, drawing on the experience of the Chairman of the Nominations Committee in conducting similar
evaluations in her other roles. In future external facilitation may be used.
The following areas were covered by the review:
• Board oversight of development and implementation of strategy;
• Creation and support of a high-performing management team;
• Financial reporting;
• Risk management;
• Stakeholder management;
• Effectiveness of board and committee meetings;
• Personal development requirements and ensuring they are satisfied; and
• Additional relevant areas.
For further discussion, see the Nominations Committee report, on page 54 of the 2020 Annual Report.
Where a board performance evaluation has taken place in the year, provide a brief overview of it, how it was conducted and its results
and recommendations. Progress against previous recommendations should also be addressed
See the Nominations Committee report, on page 54 of the 2020 annual report.
Include a more detailed description of the board performance evaluation process/cycle adopted by the Company.
This should include a summary of:
• The criteria against which board, committee and individual effectiveness is considered;
• How evaluation procedures have evolved from previous years, the results of the evaluation process and action taken or planned as a result; and
• How often board evaluations take place
See the Nominations Committee report, on page 54 of the 2020 annual report. The next Board evaluation will be undertaken
at an appropriate time, expected to be within two years.
Explain how the Company approaches succession planning and the processes by which it determines board and other senior
management appointments, including any links to the board evaluation process
The Nominations Committee, reporting to the Board, is responsible for succession planning.
Principle 8: Promote a corporate culture that is based on ethical values and behaviours
Include in the Chair’s corporate governance statement how the culture is consistent with the company’s objectives, strategy and business
model in the strategic report and with the description of principal risks and uncertainties. The statement should explain what the board
does to monitor and promote a healthy corporate culture and how the board assesses the state of the culture at present
The Board of Directors establishes the corporate culture of the Company and the Chief Executive Officer communicates it to the Company through
scheduled internal meetings with the Executive Committee, which in turn disseminate it throughout the organisation. By this means the Company’s
strategy, objectives, and approach to health, safety, environmental, and diversity issues are communicated to all employees with the Board maintaining
full oversight.
Explain how the board ensures that the Company has the means to determine that ethical values and behaviours are recognised
and respected
The Company operates a full feedback system by which the Chairman, Chief Executive Officer or Chairman of the Audit Committee are made aware
of any deviation from the Company’s ethical values.
48 / SDX Energy Plc / 2020 Annual Report & Accounts
Principle 9: Maintain governance structures and processes that are fit for purpose and support good decision making by the board
Describe the roles and responsibilities of the chair, chief executive, and any other directors who have specific individual
responsibilities or remits (e.g. for engagement with shareholders or other stakeholder groups)
Other than as described above, there are no specific individual responsibilities or remits.
Describe the roles of any committees (e.g. audit, remuneration and nomination committees) setting out any terms of reference and
matters reserved by the board for its consideration
Please, refer to the 2020 annual report pages 50 to 56.
Further information relating to the Company’s Committees can be found on the Company’s website https://www.SDX-energy.com/boardcommittees
Describe which matters are reserved for the board
The Company’s terms of reference are published on the corporate website. The following matters are a summary of the matters that require Board approval.
Strategy and plans: responsible for supervising the formulation of the strategic direction, plans, and priorities for the Company; approving capital
expenditure budgets and related operating plans; and approving material divestitures and acquisitions;
Financial and corporate issues: responsible for ensuring the implementation and integrity of the Company’s internal control and management
information systems; approving financial statements and approving the release thereof by management;
Identification and management of risks: responsible for ensuring that management has identified the principal risks of the Company’s business
and implemented appropriate strategies to manage the risks;
Policies and procedures: responsible for monitoring compliance with all significant policies and procedures by which the Company is operated;
Oversight of communications and public disclosure: ensuring that the Company has in place effective, accurate and timely disclosure and
communication processes with shareholders and financial, regulatory and other recipients;
Corporate governance matters: review the Company’s overall corporate governance arrangements;
Other: retain, oversee, compensate, and terminate the independent advisors who assist the board in its activities.
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Describe any plans for evolution of the governance framework in line with the Company’s plans for growth
As the business grows and Committee member changes are made, the Company plans to focus on the results of the recent Board evaluation.
Each Committee chairman also plans to refresh each Committee terms of reference which shall reflect the Company’s plans for growth.
Principle 10: Maintain governance structures and processes that are fit for purpose and support good decision-making by the board
Describe the work of any board committees undertaken during the year
Please refer to the 2020 Annual Report, pages 50 to 56.
Include an audit committee report (or equivalent report if such committee is not in place)
Please refer to the 2020 Annual Report, page 55.
Include a remuneration committee report (or equivalent report if such committee is not in place)
Please refer to the 2020 Annual Report, pages 50 to 53.
If the company has not published one or more of the disclosures set out under Principles 1-9, the omitted disclosures must be
identified and the reason for their omission explained
The Company has published all of the disclosures set out under Principles 1-9 and has not omitted any disclosures.
SDX Energy Plc / 2020 Annual Report & Accounts / 49
Corporate Governance
Remuneration Committee Report
The purpose of the Committee
is to assist the Board in
discharging its oversight
responsibilities relating to the
attraction, compensation,
evaluation and retention of
Executive Directors, being
currently the Chief Executive
Officer and Chief Financial
Officer, and senior
management.
50 / SDX Energy Plc / 2020 Annual Report & Accounts
The Remuneration Committee (the “Committee”) is a standing
committee of the Board of the Company and is comprised of two
independent Non-Executive Directors (including the Committee Chair),
and one non-independent Non-Executive Director.
The Committee is currently comprised of Catherine Stalker (Chairman),
Tim Linacre and Amr Al Menhali.
The purpose of the Committee is to assist the Board in discharging
its oversight responsibilities relating to the attraction, compensation,
evaluation and retention of Executive Directors, who are currently
the Chief Executive Officer, and Chief Financial Officer, and senior
management. The Committee’s role is to ensure that the Company has
the right skills and expertise it needs to achieve its strategy and that fair
and competitive compensation is awarded with appropriate performance
incentives. SDX’s remuneration policy is intended to support the
Company’s purpose, values and strategy.
The Committee held three meetings during 2020. Members’ attendance
records are disclosed in the Corporate Governance Report contained in
this Annual Report.
Consideration by the Committee of matters relating to Directors’
and senior managers’ remuneration
The Committee oversees the overall compensation policy for the senior
employees and Executive Directors of the Company. Subject to the
approval of the board, it is responsible for:
• setting and regularly reviewing the remuneration policy for all
executive directors, senior managers and the Company’s chairman,
including pension rights and any compensation payments or benefits
such as share options, share schemes or any other benefit;
• monitoring the level and structure of remuneration for senior
management;
• obtaining reliable, up-to-date information about remuneration
in other companies of comparable scale and complexity;
• approving the design of any performance-related pay schemes
operated by the Company, including determining associated
performance targets, and approving the total annual payments
made under such schemes. These schemes will enable the Company
to recover sums paid or withhold payment in certain circumstances;
• reviewing the design of all share incentive plans for approval by the
Board and shareholders and determining each year the overall and
individual amount of awards, if any, to be granted, and the
performance targets to be used;
• determining the policy for, and scope of, pension arrangements
for each executive director and other designated senior executives;
• ensuring that contractual terms on termination, and any payments
made, are fair to the individual and the Company, that failure is not
rewarded, and that the duty to mitigate loss is fully recognised;
• reviewing the directors’ compensation disclosure required to be
included in the Annual Report; and
• taking a wider view on workforce remuneration and human
resource policies.
The Company is committed to maintaining an open and transparent
dialogue with shareholders on all aspects of remuneration within the Group.
Corporate Governance
Remuneration Committee Report
Summary of work undertaken during 2020
• The Committee reviewed attainment against the 2019 KPIs and associated bonus pool. The allocation and payment of this bonus pool, which
in prior periods has been made in March, was deferred given prevailing uncertainty associated with COVID-19 and oil market volatility.
• The Committee considered a number of alternatives for the 2019 KPI bonus and, taking into consideration resilient performance and that no
government support such as furlough or tax holidays were taken, the Board subsequently approved a partial bonus to be paid in September in
a combination of cash and shares; this helped preserve the Company’s liquidity and supported alignment of management with shareholders.
• The Committee reviewed and recommended the 2020 KPIs for the bonus plan
• The Committee reviewed and recommended the 2020 awards granted under the Company’s Long Term Incentive Plan (“LTIP”), new joiner awards,
and the partial vesting of the 2017 LTIP awards.
2021 looking forward
During the year, the Committee will:
• Consider the bonus outturn for 2020
• Establish KPIs for the 2021 bonus
• Consider an LTIP award grant
• Look more widely at remuneration arrangements for senior management
Executive Directors’ service contracts
The commencement date and notice period of the Executive Director service contracts are set out below:
Director Commencement date Notice period
Mark Reid 12 November 2019 6 months from the Executive and Company
12 months in the event of a Change of Control(1)
Nick Box 12 November 2019 6 months from the Executive and Company
12 months in the event of a Change of Control(1)
(1) “Change of Control” means the acquisition by any person (or the right to acquire), whether by a series of transactions over a period of time or not, an interest in shares of the Company which (taken together with shares in which
persons acting in concert with him are interested) carry 50% or more of the voting rights of the Company.
Executive remuneration
The table below sets out the remuneration and breakdown for each Executive Director paid for the 2020 and 2019 financial years in USD:
Mark Reid Nick Box
(US$) (US$)
Salary(1) 384,185 192,092
Annual bonus(2) - -
Benefits(3) 1,935 4,474
Pension 19,209 9,605
Total 2020 405,329 206,171
Salary(4) 327,850 25,444
Annual bonus(5) 153,674 76,837
Benefits(3) 1,690 635
Pension 16,393 1,272
Total 2019 499,607 104,188
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(1) No adjustment was made to Mr. Reid's or Mr Box's salary in 2020.
(2) 2020 bonuses for Messrs. Reid and Box have been deferred due to ongoing macroeconomic uncertainty.
(3) Benefits include participation in the Group's medical insurance, income protection insurance and life insurance schemes.
(4) Mr. Box was appointed as a Director on 12 November 2019. The 2019 information given in the table above covers the period that he served as a Director during that year.
(5) It was disclosed in the 2019 Annual Report that the annual bonuses for Messrs. Reid and Box had been deferred. In September 2020, Mark Reid was awarded a bonus of £120,000, of which £48,000 was paid in cash and
£72,000 in shares in the Company, and Mr. Box was awarded a bonus of £60,000, of which £36,000 was paid in cash and £24,000 in shares in the Company. Both Mr. Reid's and Mr. Box's shares are subject to holding periods.
These bonuses reflect 40% attainment of possible target opportunity in 2019 against KPIs.
Share option plans
The Company operates three discretionary incentive share option plans: the SDX Energy Plc Long Term Incentive Plan (the “LTIP”), which permits the
grant of share-based awards, the SDX Energy plc Company Share Option Plan (“CSOP”), and the SDX Energy Plc Stock Option Plan, known together
as the “Discretionary Plans”.
The objective of the Discretionary Plans is to develop the interest of directors, officers, employees, and certain consultants of the Group in the growth
and development of the Group by providing them with the opportunity to acquire an interest in the Company and to assist the Company in retaining
and attracting executives with experience and ability.
The Discretionary Plans governs all future grants of share awards by the Company to Directors, officers, employees and certain consultants of the Group.
The directors will ensure that the maximum number of ordinary shares which may be issued pursuant to the Discretionary Plans will not exceed 10% of the
issued ordinary shares of the Company from time to time in line with the recommendations of the Association of British Insurers. As at the date of this
report, this figure is 3.7%.
In 2020, the Company incurred share-based payment charges of US$114k (2019: US$400k) in respect of Discretionary Plan awards to directors.
SDX Energy Plc / 2020 Annual Report & Accounts / 51
Corporate Governance
Remuneration Committee Report
continued
Long Term Incentive Plan
LTIP awards are structured as nil-cost options and vesting is subject to the satisfaction of certain performance targets at the end of a three-year period
from the date of grant. Vested options may be exercised up to 10 years from the date of grant.
An LTIP award was made in September 2020, which included the following performance measures, stretch targets, and weightings:
Performance measure Stretch target Weighting
Post-tax operating cash flow US$135 million 16.67%(1)
Working interest production 27,000 boe/d 16.67%(1)
Proved and probable reserves 75 million boe 16.67%(1)
Total shareholder return Outperform the FTSE All-Share Oil & Gas index(2) 50.00%
(1) Rounded to the nearest 0.01%
(2) Outperformance of the FTSE All-Share Oil & Gas index constitutes threshold performance and would result in a 25% attainment of this performance measure. The degree of outperformance will be considered by the Board of
Directors when assessing attainment above this initial 25% level.
The vesting date for the LTIP awards granted in July 2017 LTIP was in July 2020. The Committee considered outturn against the performance targets
within the award, and concluded that the targets had been partially achieved (22% attainment) such that a total of 263,548 options would vest over
ordinary shares, representing 0.129% of the Company's current issued share capital at that time. This recommendation was made to the Board of
Directors, which exercised its discretion in approving the partial vesting.
As at the date of this report, the following awards made to certain directors and employees under the LTIP were outstanding:
Total number of LTIP
Director/employees awards outstanding
Mark Reid 2,003,523
Nick Box 912,593
Employees below Board level (in aggregate) 4,205,428
7,121,545
Total
It is the intention that LTIPs are awarded on an annual basis, and the Committee will consider an award in 2021.
52 / SDX Energy Plc / 2020 Annual Report & Accounts
Stock Option Plan
The following awards have been granted to certain directors and employees under the Stock Option Plan. The most recent grant was July 2017.
Total number of
Director/employees Stock Options granted
Michael Doyle 160,000
David Mitchell 160,000
Nick Box 40,000
Employees below Board level (in aggregate) -
360,000
Total
Stock Option Plan awards contain an exercise price, which is determined at the date of grant with reference to the market value. The options are not
subject to performance targets and vest annually over a three-year period. All 360,000 outstanding options have vested. Vested options may be exercised
up to five years from the date of grant. During the period, 795,000 vested options expired.
The exercise price of the outstanding options ranges between £0.21 and £0.45, with expiries in 2021 and 2022.
Non-Executive Director fees
2020 fees US$(1) 2019 fees US$
Michael Doyle 89,770 76,801
Tim Linacre 57,628 48,940
Amr Al Menhali(2) 51,225 5,816
David Mitchell 57,709 49,066
Michael Raynes(3) - 18,614
Catherine Stalker(4) 51,997 -
(1) In 2020, the Chairman’s fee remained at £70,000 and Director fees remained at £40,000. Committee Chair fees remained at £5,000, other than the Nominations Committee Chair fee which is £nil.
(2) Amr Al Menhali was appointed as a Director on 20 November 2019
(3) Michael Raynes resigned as a Director on 25 June 2019
(4) Catherine Stalker was appointed as a Director on 6 February 2020
External advisors
The committee retained the services of PricewaterhouseCoopers LLP, who provided a paper on market practice for:
i) Executive remuneration package structure; and
ii) Incentive design and operation including structure, measures, weightings, and reference points for targets.
Fees totalling US$49,000 were charged for this engagement.
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Catherine Stalker
Chairman of the Remuneration Committee
19 March 2021
SDX Energy Plc / 2020 Annual Report & Accounts / 53
Corporate Governance
Nominations Committee Report
The Nominations Committee
(the “Committee”) was created
in 2020 as a standing
committee of the Board of the
Company and is comprised of
five Non-Executive Directors.
54 / SDX Energy Plc / 2020 Annual Report & Accounts
The Committee is currently comprised of Catherine Stalker (Chairman),
Michael Doyle, Amr Al Menhali, Tim Linacre, and David Mitchell.
The purpose of the Committee is to oversee:
• effective succession planning for the Board, its committees,
and the senior executives of the Company
• the structure, effectiveness, and performance of all members
of the Board and of all Board committees; and
• the recruitment and induction of directors.
The Committee was constituted in November 2020 and it held one
meeting during the year, with a further meeting in February 2021.
Members’ attendance records are disclosed in the Corporate Governance
Report contained in this Annual Report.
Subject to the approval of the board, the Committee is responsible for:
• regularly reviewing the structure, size, and composition (including the
skills, knowledge, experience, and diversity) of the Board and making
recommendations to the Board with regard to any changes;
• succession planning for directors and other senior executives, taking
into account the challenges and opportunities facing the Company,
and the skills and expertise needed on the Board in the future;
• identifying and nominating for the approval of the Board, candidates
to fill Board vacancies as and when they arise; and
• establishing, reviewing, and leading the Board performance
evaluation process.
Summary of work undertaken during 2020
• The Committee was established in November 2020
• The Committee agreed the approach to be taken to a Board
performance evaluation. This exercise was conducted internally,
drawing on the experience of the Chairman of the Committee in
conducting similar evaluations in her other roles.
• The evaluation took the form of an online questionnaire that all
directors completed in December 2020 followed by a discussion
of the results at the Committee meeting in February 2021.
• The evaluation found that the Board was focusing well on
development of the strategy and overseeing risk management.
Meetings are felt to be efficient with management providing good
information to the non-executives. The following areas were identified
for further attention:
- Working more closely with senior management to provide
feedback and develop the team. To address this, a meeting was
held in February 2021 to consider specifically the performance of
the top nine senior managers, identify areas for development and
potential gaps in the team. It is planned that the Nominations
Committee will do this at least once per year going forward.
- Improving how the Board monitors the company culture to
support delivery of the Company’s strategy. It was agreed that
the Board will gain more visibility of the team by increasing
participation at meetings; and
- Additional engagement with stakeholders. It was agreed that
the company would undertake an employee engagement survey
which has been launched in March 2021. Further information on
suppliers and customers will be provided in board reports to
supplement the information already produced.
2021 looking forward
It is intended that the Committee will meet at least twice in 2021.
A board evaluation at the end of 2021 is planned to review how the
Board’s effectiveness is developing, and to track progress made on the
points identified in this year’s evaluation. Succession planning for the
Board will also be given more focus in 2021.
Catherine Stalker
Chairman of the Nominations Committee
19 March 2021
Corporate Governance
Audit Committee Report
Overall, the Committee reviewed and was satisfied that the judgments
exercised by management on material items contained within the Annual
Report and Financial Statements are reasonable.
The Audit Committee has considered the Group’s internal control and risk
management policies and systems, their effectiveness, and the
requirements for an internal audit function in the context of the Group’s
overall risk management system. The Committee is satisfied that the Group
does not currently require an internal audit function; however, it will
continue to review this position periodically.
The Board has engaged PricewaterhouseCoopers LLP (“PwC”) to act as
external auditor. PwC is also invited to attend Committee meetings, unless
a conflict of interest exists. PwC was re-appointed during the financial
year, having held office with the Company and its predecessors since 2012.
The SDX Group fee to PwC for the financial year to 31 December 2020 is
GB£210,000. The Audit Committee shall undertake a comprehensive
review of the quality, effectiveness, value, and independence of the audit
provided by PwC each year, seeking the views of the wider Board, together
with relevant members of the Committee.
Although PwC has been the Company’s auditor for eight years,
the Committee is comfortable that PwC’s audit remains independent.
As required under applicable regulations, the current senior statutory
auditor, Richard Spilsbury, will be replaced by Tim McAllister for the 2021
financial year.
The Company has not adopted specific policies and procedures for the
engagement of non-audit services, however, the duties of the Audit
Committee include the review and pre-approval of all non-audit services
to be provided by the external auditor’s firm or its affiliates (including
estimated fees) and the consideration of the effect of such services on
the independence of the external audit.
Responsibilities
The Committee reviews and makes recommendations to the Board on:
• the application of significant accounting policies and any changes
to them;
• whether the Company has adopted appropriate accounting policies
and made appropriate estimates and judgements, taking into account
the views of the external auditors and the financial statements;
• compliance with accounting standards and legal and regulatory
requirements;
• disclosures in the interim and annual report and financial statements;
• reviewing the effectiveness of the Group’s financial and internal
controls;
• any significant concerns of the external auditors about the conduct,
results, or overall outcome of the annual audit of the Group;
• the provision of any non-audit services by the external auditors’
firm or its affiliates; and
• any matters that may significantly affect the independence of the
external auditors.
Tim Linacre
Chairman of the Audit Committee
19 March 2021
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SDX Energy Plc / 2020 Annual Report & Accounts / 55
Overall, the Committee
reviewed and was satisfied that
the judgments exercised by
management on material items
contained within the Annual
Report and Financial
Statements are reasonable.
The Audit Committee (the ‘Committee’) is a standing committee of the
Board of the Company and is comprised of three Non-Executive directors.
The Committee is currently comprised of Tim Linacre (Chairman), Michael
Doyle, and Amr Al Menhali.
An important part of the role of the Committee is reviewing and
monitoring the effectiveness of the Group’s financial reporting, internal
control policies, and procedures for the identification, assessment, and
reporting of risk. The Audit Committee is also responsible for overseeing
the relationship with the external auditor, including ongoing assessment
of its independence and objectivity.
During the year, the Committee met four times and the members’ attendance
record at Committee meetings during the financial year is set out in the
Corporate Governance section on page 42. After each meeting, the Chairman
of the Audit Committee reports to the Board on its proceedings.
An essential part of the integrity of the financial statements is the key
assumptions and estimates or judgments to be made. The Committee
reviews key judgments prior to publication of the financial statements
at both the end of the financial year and at the end of interim periods.
It also considers significant issues throughout the year. During 2020,
these matters included:
• Reviewing the key assumptions management uses to assess the
carrying values of assets for potential impairment. As disclosed
in the financial statements, the South Disouq asset was tested for
impairment, but no charge was required.
• Accounting for the disposal of the Group’s interest in the NW Gemsa
and South Ramadan concessions, including classification of each as a
discontinued operation; and
• Assessing the impact of COVID-19 and oil price volatility on the
Group’s financial statements and other disclosures.
Corporate Governance
Reserves Committee Report
The Reserves Committee (the
‘Committee’) is a standing
committee of the Board of the
Company and is comprised of
two Non-Executive directors.
The Committee comprises of David Mitchell (Chairman) and
Michael Doyle.
The Committee is responsible, inter alia, for arranging the preparation
of the Company’s annual regulatory reserve reporting, which it will then
review, liaising with the Company’s qualified independent reserves auditor,
and recommend to the Board for approval. It is also responsible for
appointing the qualified independent reserves auditor, ensuring their
independence, assessing performance, and relationship with the Company.
The Committee meets at least once a year prior to the approval of the
Annual Report and annual regulatory reserve reporting.
2020
• Evaluated the effectiveness of the Company’s policies, practices
and procedures for estimating oil and gas reserves.
• Met with the qualified independent reserves auditor to discuss
the performance of their audit, their access to management and
information, their estimation methodologies and key judgements,
and their independence.
• Met as a Committee to discuss and recommend for approval to the
Board the Gaffney, Cline & Associates’ Competent Persons Report for
the SDX Energy Plc Group (effective date 31 December 2020), and
associated regulatory filings.
2021 looking forward
• Review the Company’s procedures for providing information to the
qualified reserves evaluator or auditor who reports on reserves data.
• Meet with management and the qualified reserves evaluator or
auditor, to review the reserves data and the auditor’s annual
reserves report.
• Determine whether any restrictions affect the ability of the qualified
reserves evaluator or auditor to report on reserves data without
reservation.
• Review and recommend to the Board for approval the content and
filing of the Company’s annual statement of reserves data and other
oil and gas information.
David Mitchell
Chairman of the Reserves Committee
19 March 2021
56 / SDX Energy Plc / 2020 Annual Report & Accounts
Corporate Governance
Statement of Directors’ Responsibilities
The directors are responsible for preparing the Annual Report and the
financial statements in accordance with applicable law and regulation.
Company law requires the directors to prepare financial statements for
each financial year. Under that law the directors have prepared the group
financial statements in accordance with international accounting standards
in conformity with the requirements of the Companies Act 2006 and
international financial reporting standards adopted pursuant to Regulation
(EC) No 1606/2002 as it applies in the European Union and company
financial statements in accordance with United Kingdom Generally
Accepted Accounting Practice (United Kingdom Accounting Standards,
comprising FRS 102 “The Financial Reporting Standard applicable in the
UK and Republic of Ireland”, and applicable law). In preparing the group
financial statements, the directors have also elected to comply with
International Financial Reporting Standards issued by the International
Accounting Standards Board (IFRSs as issued by IASB).
Under company law, directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of the state of
affairs of the group and company and of the profit or loss of the group for
that period. In preparing the financial statements, the directors are
required to:
• select suitable accounting policies and then apply them consistently;
• state whether applicable international accounting standards in
conformity with the requirements of the Companies Act 2006,
international financial reporting standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union
and IFRSs issued by IASB have been followed for the group financial
statements and United Kingdom Accounting Standards, comprising
FRS 102 have been followed for the company financial statements,
subject to any material departures disclosed and explained in the
financial statements;
• make judgements and accounting estimates that are reasonable
and prudent; and
• prepare the financial statements on the going concern basis unless
it is inappropriate to presume that the group and company will
continue in business.
The directors are also responsible for safeguarding the assets of the group
and company and hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
The directors are responsible for keeping adequate accounting records that
are sufficient to show and explain the group’s and company’s transactions
and disclose with reasonable accuracy at any time the financial position of
the group and company and enable them to ensure that the financial
statements comply with the Companies Act 2006.
The directors are responsible for the maintenance and integrity of the
company’s website. Legislation in the United Kingdom governing the
preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
Directors’ confirmations
In the case of each director in office at the date the directors’ report
is approved:
• so far as the director is aware, there is no relevant audit information
of which the group’s and company’s auditors are unaware; and
• they have taken all the steps that they ought to have taken as a
director in order to make themselves aware of any relevant audit
information and to establish that the group’s and company’s auditors
are aware of that information.
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SDX Energy Plc / 2020 Annual Report & Accounts / 57
Financial Statements
Low cost /
High margin
production
58 / SDX Energy Plc / 2020 Annual Report & Accounts
Group
Financial Statements
Independent Auditors’ Report 60
Consolidated Balance Sheet 66
Consolidated Statement of Comprehensive Income 67
Consolidated Statement of Changes in Equity 68
Consolidated Statement of Cash Flows 69
Notes to the Consolidated Financial Statements 70
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SDX Energy Plc / 2020 Annual Report & Accounts / 59
Financial Statements
Independent Auditors’ Report
Report on the audit of the financial statements
Opinion
In our opinion:
• SDX Energy Plc’s group financial statements and parent company financial statements (the “financial statements”) give a true and fair view of the state
of the group’s and of the parent company’s affairs as at 31 December 2020 and of the group’s loss and the group’s cash flows for the year then ended;
• the group financial statements have been properly prepared in accordance with international accounting standards in conformity with the
requirements of the Companies Act 2006;
• the parent company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice
(United Kingdom Accounting Standards, comprising FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland”, and
applicable law); and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements, included within the Annual Report & Accounts, which comprise: the Consolidated Balance Sheet and the Parent Company Balance
Sheet as at 31 December 2020; the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Cash Flows, the Consolidated Statement of Changes
in Equity and the Parent Company Statement of Changes in Equity for the year then ended; and the notes to the financial statements, which include a description of the
significant accounting policies.
Separate opinion in relation to international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the
European Union
As explained in note 2 to the group financial statements, the group, in addition to applying international accounting standards in conformity with the requirements of the
Companies Act 2006, has also applied international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.
In our opinion, the group financial statements have been properly prepared in accordance with international financial reporting standards adopted pursuant to Regulation
(EC) No 1606/2002 as it applies in the European Union.
Separate opinion in relation to IFRSs as issued by the IASB
As explained in note 2 to the financial statements, the group, in addition to applying international accounting standards in conformity with the requirements of the
Companies Act 2006, has also applied international financial reporting standards (IFRSs) as issued by the International Accounting Standards Board (IASB).
In our opinion, the group financial statements have been properly prepared in accordance with IFRSs as issued by the IASB.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”), International Standards on Auditing (“ISAs”) and applicable law.
Our responsibilities under ISAs (UK) and ISAs are further described in the Auditors’ responsibilities for the audit of the financial statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We remained independent of the group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, which includes
the FRC’s Ethical Standard and the International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants, as applicable to listed entities,
and we have fulfilled our other ethical responsibilities in accordance with these requirements.
60 / SDX Energy Plc / 2020 Annual Report & Accounts
Our audit approach
Overview
Audit scope • We conducted full scope audits of five components out of the Group’s twenty-two components
Materiality
which were selected due to their size and risk characteristics. An audit of one or more account
balances, classes of transactions or disclosures was performed on certain balances and
transactions at a further four components.
• This enabled us to obtain coverage of 99% of consolidated revenue, 93% coverage of
consolidated loss before tax and 99% coverage of consolidated total assets of the Group.
Audit scope
Key audit matters • Carrying value of oil and gas properties and exploration and evaluation assets (group)
• Impact of COVID-19 (group and parent)
• Carrying value of investment in subsidiaries (parent)
Key audit
matter
Materiality • Overall group materiality: US$1,245,000 (2019: US$1,330,000) based on 1% of total assets.
• Overall parent company materiality: £380,000 (2019: £188,000) based on 1% of total assets.
• Performance materiality: US$933,750 (group) and £285,000 (parent company).
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements.
Capability of the audit in detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined in the Auditors’
responsibilities for the audit of the financial statements section, to detect material misstatements in respect of irregularities, including fraud. The extent to which our
procedures are capable of detecting irregularities, including fraud, is detailed below.
Based on our understanding of the group and industry, we identified that the principal risks of non-compliance with laws and regulations related to tax regulations,
employment laws, health and safety regulation, competition and anti-bribery laws and data protection regulations, and we considered the extent to which non-compliance
might have a material effect on the financial statements. We also considered those laws and regulations that have a direct impact on the preparation of the financial
statements such as the Companies Act 2006. We evaluated management’s incentives and opportunities for fraudulent manipulation of the financial statements (including the
risk of override of controls), and determined that the principal risks were related to the posting of inappropriate journal entries and management bias in accounting estimates.
The group engagement team shared this risk assessment with the component auditors so that they could include appropriate audit procedures in response to such risks in
their work. Audit procedures performed by the group engagement team and/or component auditors included:
• Discussions with management and making enquiries of the Group's legal counsel, including consideration of known or suspected instances of non-compliance with
laws and regulation and fraud.
• Understanding and evaluating controls designed to prevent and detect irregularities and fraud.
• Assessing significant judgements and estimates in particular those relating to impairment of oil & gas assets, impairment of exploration and evaluation assets
and investment impairment assessments, and the disclosure of these items (and as outlined further in the ‘Key audit matters’ section of this report).
• Identifying and testing journal entries, in particular journal entries posted with unusual account combinations.
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There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-compliance with laws and regulations that are
not closely related to events and transactions reflected in the financial statements. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk
of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the financial statements of the current period
and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by the auditors, including those which had the greatest
effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters, and any comments we make
on the results of our procedures thereon, were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters.
This is not a complete list of all risks identified by our audit.
Going Concern, which was a key audit matter last year, is no longer included because of facts and circumstances at the current report date, in our professional judgement,
mean there is less judgement and uncertainty as to the appropriateness of the going concern assumption compared with the prior reporting year. Specifically, there is less risk
and uncertainty as to the potential impact of the Covid-19 pandemic on the operations and business of the Group. Our conclusions in respect of Going Concern for the
current year are set out in the “Conclusions relation to going concern” section below. Otherwise, the key audit matters below are consistent with last year.
SDX Energy Plc / 2020 Annual Report & Accounts / 61
Financial Statements
Independent Auditors’ Report
to the members of SDX Energy Plc
Our audit approach (continued)
Key audit matter
Carrying value of oil and gas properties and exploration and evaluation
assets (group)
Refer to note 4 Significant Accounting Policies, note 9 Property, Plant and
Equipment and note 10 Exploration and Evaluation Assets. As at 31 December
2020, the consolidated balance sheet carrying value of property, plant and
equipment totalled US$57.9 million (comprising US$57.3 million of oil and gas
properties) and capitalised exploration costs totalled US$24.5 million. As disclosed in
note 9, management identified an impairment trigger in respect of South Disouq.
Management prepared an assessment of recoverable amount using Fair Value less
Costs of Disposal (“FVLCD”) methodology for this cash-generating unit (“CGU”),
concluding that no impairment loss had occurred. We focused on this area due to
the material nature of the balance, the judgement involved in identifying whether
an impairment trigger had arisen and the judgement and estimation uncertainty in
preparing the estimate of recoverable amount of this CGU.
Impact of COVID-19 (group and parent)
As set out in the Annual Report & Accounts, management has considered the
impact of Covid-19 on the Group, alongside the actions that have been taken i
n response to the pandemic. Refer to the Financial review, note 2 (e) Basis of
preparation for the group and note 1 for the Parent Company. As a result of the
pandemic and oil price reduction in 2020 there is a heightened level of uncertainty
in respect of certain accounting estimates, such as impairment assessments.
Management has also considered the potential impact of Covid-19 in undertaking
their assessment of going concern. In addition to the impact on financial reporting,
management has adjusted its ways of working in response to the pandemic. This has
resulted in change to the Group’s financial reporting processes and the control
environment.
How our audit addressed the key audit matter
We evaluated management’s impairment trigger assessment for its oil and gas
properties and its exploration and evaluation assets. We agreed with its assessment
that an impairment trigger has arisen in respect of South Disouq. In respect of
management’s assessment of the FVLCD of South Disouq we:
• Evaluated the compliance of management’s assessment of recoverable
amount for South Disouq with applicable accounting standards;
• Obtained management’s discounted cash flow model and assessed its
mathematical accuracy;
• Verified that its gas price assumptions were in line with the underlying
contractual agreements for the asset; • Engaged PwC Valuation experts
to assist us in assessing the reasonableness of the discount rate applied
by management;
• Assessed the competency, independence and objectivity of the experts
in relation to the estimation of commercial reserves. We discussed the key
judgments and assumptions used in the report directly with experts;
• Assessed the extent to which risk had been appropriately taken into
account in management’s estimate; and
• Evaluated the reasonableness of the valuation ascribed to the exploration
acreage within the CGU.
Based on the above procedures, we are satisfied that management’s conclusion
that no impairment loss has occurred is reasonable. Finally, we considered the
adequacy of management’s disclosure of the key judgements and sensitivities in
relation to the impairment assessment and found these to be reasonable.
Our procedures in respect of impairment for both the Group and parent company
are set out in separate key audit matters of this report.
Our procedures and conclusions in respect of going concern are set out separately
within the “Conclusions relating to going concern” section of this report.
We considered whether changes to working practices brought about by Covid-19
had an adverse impact on the effectiveness of management’s business processes
controls. Our work did not identify any changes which had a significant impact on
our audit approach other than needing to perform most of our work remotely.
We increased the frequency and extent of our oversight over component audit
teams, using video conferencing and undertaking remote review of working papers,
to satisfy ourselves as to the sufficiency and adequacy of audit work performed at
local components. We used local PwC resources to attend an inventory count in
Morocco due to current travel restrictions in the United Kingdom.
We considered the appropriateness of disclosures in the financial statements in
relation to the impact of the pandemic on the relevant accounting estimates and
concluded that these are appropriate.
Carrying value of investment in subsidiaries (parent)
The carrying value of the parent company’s investments in subsidiaries was
£40.9 million at 31 December 2020. This represents 99% of the parent company’s
total assets. Investments in subsidiaries are accounted for at historical cost less
accumulated impairment. Judgement is required to assess if impairment triggers
exist and where triggers are identified, if the investment carrying value is supported
by the recoverable amount. In assessing for impairment triggers, management
considers if the underlying net assets of the investment support the carrying
amount and whether other facts and circumstances, including impairments recorded
in the Group financial statements, would be indicative of a trigger. Based on
management’s assessment, no impairment triggers in respect of the carrying value
of investments in subsidiaries were identified at the balance sheet date. Refer to
note 3 of the parent company financial statements. We focused on this area due
to the material nature of the balance.
In respect of investments in subsidiaries in the parent company, we undertook
the following to test management’s assessment for indicators of impairment:
• evaluated and challenged management’s assessment and judgements,
including ensuring that consideration had been given to the results of the
Group’s impairment assessment; and
• independently performed an assessment of other internal and external
impairment triggers, including considering the market capitalisation of the
Group with reference to the carrying value of investments in subsidiaries
in the parent company to identify other possible impairment indicators.
As a result of our work, we are satisfied that management’s assessment is
appropriate and that there are no indicators of impairment in respect of the carrying
value of the parent company’s investments in subsidiaries at 31 December 2020.
62 / SDX Energy Plc / 2020 Annual Report & Accounts
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole, taking into account
the structure of the group and the parent company, the accounting processes and controls, and the industry in which they operate.
The Group financial statements are a consolidation of twenty-two components and has only two operating segments, that being Morocco and Egypt. In establishing the
overall approach to the group audit, we determined the type of work that needed to be performed over the components either by the group engagement team or the
component auditors from other PwC network firms operating under our instruction.
Our interactions and procedures over our component auditors in Egypt comprised of the following:
• We determined the areas of key audit risks that related to Egyptian entities’ business activities and the audit procedures that would be required to address these risks.
We allocated the execution of these procedures between the group audit team and our component audit team in Egypt;
• The group audit team had ongoing communication with our component team in Egypt throughout the interim and year end audit; and
• We reviewed the component auditors’ key working papers.
We identified five components that, in our view, required full scope audits due to their relative size or risk characteristics. The full scope audit of three Egyptian components
were performed by our component audit team in Egypt. In addition, our component audit team in Egypt performed an audit of one or more account balances, classes of
transactions or disclosures on a further two Egyptian components. The group engagement team performed the full scope audit of the Morocco component and one UK
component and in addition, performed an audit of one or more account balances, classes of transactions or disclosures on one two further UK components. The above gave
us coverage of 99% of consolidated revenue, 93% coverage of consolidated loss before tax and 99% coverage of consolidated total assets for the Group.
The Group engagement team directly performed the audit of the consolidation. This together with additional procedures performed at the Group level gave us the evidence
we needed for our opinion of the Group financial statements as a whole.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with qualitative considerations,
helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and
in evaluating the effect of misstatements, both individually and in aggregate on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Financial statements-group Financial statements-parent company
Overall materiality US$1,245,000 (2019: US$1,330,000). £380,000 (2019: £188,000).
How we determined it 1% of total assets 1% of total assets
Rationale for benchmark applied This benchmark reflects the Group’s primary We believe that total assets is the primary measure
focus to continue to enlarge its assets through used by the shareholders in assessing the
significant investment in its exploration and performance of the entity, and is a generally
development assets. accepted auditing benchmark.
For each component in the scope of our group audit, we allocated a materiality that is less than our overall group materiality. The range of materiality allocated across
components was US$0.1 million to US$1.0 million. Certain components were audited to a local statutory audit materiality that was also less than our overall group materiality.
We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds overall
materiality. Specifically, we use performance materiality in determining the scope of our audit and the nature and extent of our testing of account balances, classes of
transactions and disclosures, for example in determining sample sizes. Our performance materiality was 75% of overall materiality, amounting to US$933,750 for the group
financial statements and £285,000 for the parent company financial statements.
In determining the performance materiality, we considered a number of factors-the history of misstatements, risk assessment and aggregation risk and the effectiveness
of controls-and concluded that an amount in the middle of our normal range was appropriate.
We agreed with those charged with governance that we would report to them misstatements identified during our audit above US$62,250 (group audit) (2019: US$67,000)
and £19,000 (parent company audit) (2019: £9,400) as well as misstatements below those amounts that, in our view, warranted reporting for qualitative reasons.
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SDX Energy Plc / 2020 Annual Report & Accounts / 63
Financial Statements
Independent Auditors’ Report
to the members of SDX Energy Plc
Conclusions relating to going concern
Our evaluation of the directors’ assessment of the group’s and the parent company’s ability to continue to adopt the going concern basis of accounting included:
• Checked the mathematical accuracy of management’s cash flow forecast and validated the opening cash position;
• Validated management’s underlying cash flow projections for the Group to other external and internal sources where appropriate, including recent production,
oil price forecasts and comparing cost assumptions to historic actuals and underlying budgets;
• Performed sensitivity analysis to assess the impact of the key assumptions underlying the forecast such as a reduction in oil price, reduction in production and the
Group’s ability to take mitigating actions, if required; and
• Reviewed the completeness and appropriateness of management’s going concern disclosures in the financial statements.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt
on the group’s and the parent company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the financial statements
is appropriate.
However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the group’s and the parent company’s ability to continue
as a going concern.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Reporting on other information
The other information comprises all of the information in the Annual Report & Accounts other than the financial statements and our auditors’ report thereon. The directors
are responsible for the other information. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion
or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is
materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If we identify an apparent
material inconsistency or material misstatement, we are required to perform procedures to conclude whether there is a material misstatement of the financial statements
or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information,
we are required to report that fact. We have nothing to report based on these responsibilities.
With respect to the Strategic report and Directors’ Report, we also considered whether the disclosures required by the UK Companies Act 2006 have
been included.
Based on our work undertaken in the course of the audit, the Companies Act 2006 requires us also to report certain opinions and matters as described below.
Strategic Report and Directors’ Report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report and Directors’ Report for the year ended
31 December 2020 is consistent with the financial statements and has been prepared in accordance with applicable legal requirements.
In light of the knowledge and understanding of the group and parent company and their environment obtained in the course of the audit, we did not identify
any material misstatements in the Strategic Report and Directors’ Report.
64 / SDX Energy Plc / 2020 Annual Report & Accounts
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Statement of Directors’ Responsibilities, the directors are responsible for the preparation of the financial statements in accordance with
the applicable framework and for being satisfied that they give a true and fair view. The directors are also responsible for such internal control as they determine is necessary
to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s ability to continue as a going concern, disclosing,
as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or the parent
company or to cease operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error,
and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance
with ISAs (UK) and ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually
or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing techniques. However, it typically involves
selecting a limited number of items for testing, rather than testing complete populations. We will often seek to target particular items for testing based on their size or risk
characteristics. In other cases, we will use audit sampling to enable us to draw a conclusion about the population from which the sample is selected.
A further description of our responsibilities for the audit of the financial statements in accordance with ISAs (UK) is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those
risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud
is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness of the Group’s and parent company’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material
uncertainty exists related to events or conditions that may cast significant doubt on the Group’s and parent company’s ability to continue as a going concern. If we
conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such
disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future
events or conditions may cause the Group or parent company to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the
underlying transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group and parent company to express
an opinion on the financial statements. We are responsible for the direction, supervision and performance of the Group and parent company audit. We remain solely
responsible for our audit opinion.
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We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including
any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate
with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or
safeguards applied.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements
of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the
matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
Use of this report
This report, including the opinions, has been prepared for and only for the company’s members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006
and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or
into whose hands it may come save where expressly agreed by our prior consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not obtained all the information and explanations we require for our audit; or
• adequate accounting records have not been kept by the company, or returns adequate for our audit have not been received from branches not visited by us; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• the company financial statements are not in agreement with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
Richard Spilsbury (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Aberdeen
19 March 2021
SDX Energy Plc / 2020 Annual Report & Accounts / 65
Financial Statements
Consolidated Balance Sheet
As at 31 December 2020
As at As at
31 December 31 December
US$’000s Note 2020 2019
Assets
Cash and cash equivalents 7 10,056 11,054
Trade and other receivables 6a 18,608 21,774
Inventory 8 8,414 7,972
Current assets 37,078 40,800
Investments 11 3,790 3,916
Property, plant and equipment 9 57,880 67,895
Exploration and evaluation assets 10 24,455 18,720
Right-of-use assets 22 1,400 1,687
Non-current assets 87,525 92,218
Total assets 124,603 133,018
Liabilities
Trade and other payables 12 20,120 25,982
Decommissioning liability 13 327 317
Current income taxes 14 241 1,484
Lease liability 22 461 506
Current liabilities 21,149 28,289
Decommissioning liability 13 5,862 5,287
Deferred income taxes 14 290 290
Lease liability 22 960 1,121
Non-current liabilities 7,112 6,698
Total liabilities 28,261 34,987
Equity
Share capital 15 2,601 2,593
Share premium 15 130 -
Share-based payment reserve 16 7,269 7,038
Accumulated other comprehensive loss (917) (917)
Merger reserve 15 37,034 37,034
Retained earnings 50,225 52,283
Total equity 96,342 98,031
Equity and liabilities 124,603 133,018
The notes are an integral part of these Consolidated Financial Statements.
The Consolidated Financial Statements on pages 66 to 90 were approved by the board of directors on 19 March 2021 and signed on its behalf by:
Mark Reid Nicholas Box
Chief Executive Officer and Director Chief Financial Officer and Director
66 / SDX Energy Plc / 2020 Annual Report & Accounts
Financial Statements
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2020
Year ended 31 December
US$’000s Note(s) 2020 2019
Revenue, net of royalties 17 46,068 34,822
Direct operating expense (9,535) (6,595)
Gross profit 36,533 28,227
Exploration and evaluation expense 10 (5,809) (11,427)
Depletion, depreciation and amortisation 9,22 (25,192) (18,677)
Impairment expense 9 - (8,327)
Stock-based compensation 16 (231) (178)
Share of profit from joint venture 11 696 1,161
General and administrative expenses
-Ongoing general and administrative expenses 18 (3,972) (4,581)
-Transaction costs 18 (152) (1,079)
Operating income/(loss) 1,873 (14,881)
Finance costs (598) (510)
Foreign exchange gain/(loss) 153 (150)
Income/(loss) before income taxes 1,428 (15,541)
Current income tax expense 14 (5,254) (2,249)
Profit/(loss) from discontinued operations 23 1,768 (396)
Loss and total comprehensive loss for the period (2,058) (18,186)
Net loss per share
Basic
19 $(0.010) $(0.089)
Diluted 19 $(0.010) $(0.089)
The notes are an integral part of these Consolidated Financial Statements.
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Financial Statements
Consolidated Statement of Changes in Equity
For the year ended 31 December 2020
Year ended 31 December
US$’000s Note 2020 2019
Share capital
Balance, beginning of period 15 2,593 88,899
Share-for-share exchange-old 15 - (88,899)
Share-for-share exchange-new 15 - 51,865
Capital reduction 15 - (49,272)
Issue of shares 15 8 -
Balance, end of period 2,601 2,593
Share premium
Balance, beginning of period - -
Issue of shares 15 130 -
Balance, end of period 130 -
Share-based payment reserve
Balance, beginning of period 7,038 6,860
Share-based compensation for the period 231 178
Balance, end of period 7,269 7,038
Accumulated other comprehensive loss
Balance, beginning of period 15 (917) (917)
Balance, end of period (917) (917)
Merger reserve
Balance, beginning of period 15 37,034 -
Share-for-share exchange - 37,034
Balance, end of period 37,034 37,034
Retained earnings
Balance, beginning of period 52,283 21,197
Capital reduction 15 - 49,272
Total comprehensive loss for the year (2,058) (18,186)
Balance, end of period 50,225 52,283
Total equity 96,342 98,031
The notes are an integral part of these Consolidated Financial Statements.
68 / SDX Energy Plc / 2020 Annual Report & Accounts
Financial Statements
Consolidated Statement of Cash Flows
For the year ended 31 December 2020
Year ended 31 December
US$’000s Note(s) 2020 2019
Cash flows generated from/(used in) operating activities
Income/(loss) before income taxes 1,428 (15,541)
Adjustments for:
Depletion, depreciation and amortisation 9,22 25,192 18,677
Exploration and evaluation expense 10 4,457 10,255
Impairment expense - 8,327
Finance expense 598 510
Stock-based compensation charge 16 231 178
Foreign exchange gain (369) (437)
Tax paid by state 14 (5,107) (1,525)
Share of profit from joint venture 11 (696) (1,161)
Operating cash flow before working capital movements 25,734 19,283
Increase in trade and other receivables 6a (1,243) (3,572)
Increase/(decrease) in trade and other payables 12 3,041 (1,584)
Payments for inventory 8 (4,459) (556)
Payments for decommissioning 13 (611) (155)
Cash generated from operating activities 22,462 13,416
Income taxes paid 14 (1,121) (1,306)
Net cash generated from operating activities 21,341 12,110
Cash generated from discontinued operations 2,445 12,957
Cash flows generated from/(used in) investing activities:
Property, plant and equipment expenditures 9 (18,188) (24,777)
Exploration and evaluation expenditures 10 (10,333) (3,647)
Proceeds on disposal 23 3,500 -
Dividends received 11 773 639
Net cash used in investing activities (24,248) (27,785)
Cash used in investing activities of discontinued operations - (2,892)
Cash flows generated from/(used in) financing activities:
Payments of lease liabilities 22 (636) (795)
Finance costs paid (269) (267)
Net cash used in financing activities (905) (1,062)
Decrease in cash and cash equivalents (1,367) (6,672)
Effect of foreign exchange on cash and cash equivalents 369 381
Cash and cash equivalents, beginning of period 11,054 17,345
Cash and cash equivalents, end of period 10,056 11,054
The notes are an integral part of these Consolidated Financial Statements.
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Financial Statements
Notes to the Consolidated Financial Statements
For the year ended 31 December 2020
1. Reporting entity
SDX Energy Plc (“SDX” or “the Company”) is a company domiciled in the United Kingdom. The address of the Company’s registered office is 38 Welbeck
Street, London, United Kingdom, W1G 8DP. The Consolidated Financial Statements of the Company as at and for the year ended 31 December 2020
(“Consolidated Financial Statements”) comprise the Company and its wholly owned subsidiaries and include the Company’s share of joint arrangements
(together the “Group”).
The Company’s shares trade on the London Stock Exchange’s Alternative Investment Market (“AIM”) in the United Kingdom under the symbol “SDX”.
The Company is engaged in the exploration for and development and production of oil and natural gas. The Company’s principal properties are in the
Arab Republic of Egypt and the Kingdom of Morocco.
On 28 May 2019, the Company obtained control of the entire issued share capital of SDX Energy Inc. via a share-for-share exchange. There were no
changes in rights or proportion of control exercised as a result of this transaction. As no change in legal ownership occurred, this was a common control
transaction and therefore outside the scope of IFRS 3. In substance, these Consolidated Financial Statements reflect the continuation of the pre-existing
Group headed by SDX Energy Inc., and they have been prepared applying the principles of predecessor accounting.
The prior period Consolidated Statement of Changes in Equity presents the legal change in ownership of the Group, including the share capital of
SDX Energy Plc and the merger reserve arising from the share-for-share exchange transaction.
On 4 June 2019, the High Court of Justice Chancery Division made an order confirming the reduction of share capital of SDX Energy Plc pursuant
to section 648 of the Companies Act 2006.
The Consolidated Statement of Changes in Equity and the additional disclosures in note 15 explain the impact of the share-for-share exchange
and the reduction of share capital in more detail.
2. Basis of preparation
a) Statement of compliance
These Consolidated Financial Statements have been prepared in accordance with international accounting standards in conformity with the requirements
of the Companies Act 2006 and international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the
European Union. In preparing the Consolidated Financial Statements, the directors have also elected to comply with International Financial Reporting
Standards issued by the International Accounting Standards Board (IFRSs as issued by IASB).
These Consolidated Financial Statements of SDX Energy Plc were approved by the board of directors on 19 March 2021.
b) Basis of measurement
The Consolidated Financial Statements have been prepared on the historical cost basis.
c) Functional and presentation currency
The functional currency for each entity in the Group, and for joint arrangements and associates, is the currency of the primary economic environment
in which that entity operates. Transactions denominated in other currencies are converted into the functional currency at the exchange rate ruling at
the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at year-end exchange rates.
The Group’s financial statements are presented in US dollars, as that presentation currency most reliably reflects the business performance of the Group
as a whole. On consolidation, income statement items for each entity are translated from the functional currency into US dollars at average rates of
exchange, where the average is a reasonable approximation of rates prevailing on the transaction date. Balance sheet items are translated into
US dollars at period-end exchange rates.
70 / SDX Energy Plc / 2020 Annual Report & Accounts
Financial Statements
Page title
d) Use of estimates and judgments
The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates, and assumptions that affect the
application of accounting policies and the reported amounts of assets, liabilities, income, and expenses. Actual results may differ from these estimates and
affect the results reported in these Consolidated Financial Statements. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions
to accounting estimates are recognised in the year in which the estimates are revised and in any future years affected.
Purchase price allocations, depletion, depreciation and amortisation, and amounts used in impairment calculations are based on estimates of crude oil
and natural gas reserves. Reserve estimates are based on engineering data, estimated future prices, expected future rates of production, and the timing
of future capital expenditures, all of which are subject to many uncertainties, interpretations, and judgements. The Company expects that, over time,
its reserve estimates will be revised upward or downward, based on updated information, such as the results of future drilling, testing, and production
levels, and may be affected by changes in commodity prices.
In accounting for property, plant, and equipment during the drilling of oil and gas wells, at period end it is necessary to estimate the value of work done
(“VOWD”) for any unbilled goods and services provided by contractors.
The invoicing of produced crude oil, natural gas, and natural gas liquids is, for non-operated concessions, performed by the Company’s joint venture
partners. In certain concessions, the operator relies on production and/or price information from other third parties, which may not be consistently
prepared and received on a timely basis. In such instances, the Company may be required to estimate production volumes and/or prices based on the
most robust available data.
Provisions recognised for decommissioning costs and related accretion expense, derivative fair value calculations, fair value of share-based payments expense,
deferred tax provisions, and fair values assigned to any identifiable assets and liabilities in business combinations are also based on estimates. By their nature,
the estimates are subject to measurement uncertainty and the impact on the Consolidated Financial Statements of future periods could be material.
The accounting estimate for the reporting period that had the highest degree of estimation uncertainty was the recoverable amount for the South Disouq
asset, which was tested for impairment following the identification of impairment indicators. Please refer to note 9 for further discussion.
e) Going concern
The Company directors have reviewed the Company’s forecasted cash flows for the next 12 months from the date of approval of these Consolidated
Financial Statements. The capital expenditure and operating costs used in these forecasted cash flows are based on the Company’s board-approved 2021
SDX corporate budget, which reflects approved operating budgets for each of its joint ventures and an estimate of 2021 SDX corporate general and
administrative expenses. The Company’s forecasted cash flows also reflect its best estimate of operational and corporate expenditure, including corporate
general and administrative costs. The directors have made enquiries into and considered the Egyptian and Moroccan business environments and future
expectations regarding commodity price risk, particularly the oil price risk, given the volatility in quoted Brent and WTI crude oil prices.
The directors have considered the sensitivities and potential outcomes relating to:
i) country and commodity price risks;
ii) the Company’s ability to change the timing and scale of discretionary capital expenditure;
iii) the Company’s ability to manage operating costs; and
iv) the Company’s ability to manage general and administrative costs.
The directors have considered the impact on the forecasted cash flows of the volatile oil price environment and potential impact on demand resulting from
the COVID-19 virus, as well as counterparty credit risk. In addition, the directors have considered the counterparty credit risk resulting from the COVID-19
virus. The directors have performed sensitivities on these forecasted cash flows and note that the Company’s underlying long-term fixed-price contracts in
Gharb Basin gas fields in Morocco and South Disouq in Egypt mitigated the potential risk on going concern.
As a result of this analysis, the directors consider that, in a low-price environment the Company has sufficient resources at its disposal to continue for the
foreseeable future. The foreseeable future is defined as being not less than 12 months from the date of approval of these Consolidated Financial Statements.
Given the above, these Consolidated Financial Statements continue to be prepared under the going concern basis of accounting.
3. New accounting standards adopted
Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2020 reporting periods and have not
been early adopted by the group. These standards are not expected to have a material impact on the entity in the current or future reporting periods and
on foreseeable future transactions.
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SDX Energy Plc / 2020 Annual Report & Accounts / 71
Financial Statements
Notes to the Consolidated Financial Statements
For the year ended 31 December 2020
4. Significant accounting policies
The accounting policies set out below have been applied consistently to all years presented in these Consolidated Financial Statements and have been
applied consistently by the Company and its subsidiaries.
a) Basis of consolidation
i) Subsidiaries
Subsidiaries are entities controlled by the Company. Control exists where the Company has; power over the entities, that is existing rights that give it the
current ability to direct the relevant activities of the entities (those that significantly affect the Companies’ returns); exposure, or rights, to variable returns
from its involvement with the entities; and the ability to use its power to affect those returns. Subsidiaries are fully consolidated from the date on which
control is transferred to the Group. They are deconsolidated from the date that control ceases.
ii) Joint arrangements
A joint arrangement is an arrangement by which two or more parties have joint control. Joint control is the contractually agreed sharing of control such
that decisions about the relevant activities of the arrangement (those that significantly affect the companies’ returns) require the unanimous consent of
the parties sharing control. The Company has one joint arrangement, its 50% equity interest in Brentford Oil Tools LLC (“Brentford”). As the parties sharing
joint control in this entity have rights to its net assets, the arrangement constitutes a joint venture and is accounted for using the equity accounting
method. Under the equity method of accounting, the investment in Brentford was initially recognised at cost and adjusted thereafter for the post-
acquisition change in the net assets. The Company’s Consolidated Statement of Comprehensive Income includes its share of Brentford’s profit or loss.
The Company’s other comprehensive income includes its share of Brentford’s other comprehensive income. Dividends received or receivable from
Brentford are recognised as a reduction in the carrying amount of the investment.
iii) Investments in associates
An associate is an entity over which the Company has significant influence, and is equity accounted for.
iv) Transactions eliminated on consolidation
Intercompany balances and transactions, and any unrealised income and expenses arising from intercompany transactions, are eliminated in preparing
the Consolidated Financial Statements.
b) Foreign currency
Transactions in foreign currencies are translated into United States dollars at exchange rates available on the dates of the transactions. Monetary assets
and liabilities denominated in foreign currencies are translated into United States dollars at the period end exchange rate.
Foreign exchange gains and losses resulting from the settlement of such transactions and the translation at exchange rates ruling at the period-end date
of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement. Previously, such gains and losses were
recognised in other comprehensive income. The updated accounting policy has no net effect on prior-period total comprehensive income or equity.
c) Financial instruments
i) Non-derivative financial instruments
Non-derivative financial instruments comprise trade and other receivables, cash and cash equivalents, and trade and other payables. Non-derivative financial
instruments are recognised initially at fair value. Subsequent to initial recognition, non-derivative financial instruments are measured as described below.
Financial assets and liabilities are recognised when the Company becomes party to the contractual provisions of the instrument. Financial assets are
derecognised when the rights to receive cash flows from the assets have expired or been transferred and the Company has transferred substantially
all risks and rewards of ownership.
Financial assets and liabilities are offset and the net amount is reported in the balance sheet when there is a legally enforceable right to offset
the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.
Cash and cash equivalents
Cash and cash equivalents are comprised of cash in hand, deposits with banks, term deposits, and other short-term highly liquid investments
with original maturities of three months or less.
Financial assets at fair value through the Consolidated Statement of Comprehensive Income
An instrument is classified at fair value through the Consolidated Statement of Comprehensive Income if it is held for trading or is designated as such
upon initial recognition. Financial instruments are designated at fair value through the Consolidated Statement of Comprehensive Income if the Company
manages such investments and makes purchase and sale decisions based on their fair value in accordance with the Company’s risk management or
investment strategy. Upon initial recognition, attributable transaction costs are recognised in the Consolidated Statement of Comprehensive Income when
incurred. Financial instruments are measured at fair value and changes therein are recognised in the Consolidated Statement of Comprehensive Income.
Financial liabilities
Financial liabilities at amortised cost include trade payables. Trade payables are initially recognised at the amount required to be paid, less (when material)
a discount to reduce the payables to fair value. Subsequently, trade payables are measured at amortised cost using the effective interest method.
Financial assets
Trade and other receivables, which are non-derivative financial assets that have fixed or determinable payments that are not quoted in an active market
and are measured at amortised cost. They are included in current assets, except for maturities greater than 12 months after the reporting date, which are
classified as non-current assets.
72 / SDX Energy Plc / 2020 Annual Report & Accounts
ii) Equity instruments
Equity instruments are classified as equity. Incremental costs directly attributable to the issue of common shares and share options are recognised
as a deduction from equity, net of any tax effects, if any.
d) Inventory
Inventories consist of tangible drilling materials and other consumables. Inventories are stated at the lower of cost and net realisable value.
Cost is determined using the weighted average method. Net realisable value is the estimated selling price less applicable selling expenses.
e) Property, plant and equipment and intangible exploration and evaluation expenses
i) Recognition and measurement
Development and production costs
Property, plant and equipment are stated at cost, less accumulated depletion and depreciation and accumulated impairment losses.
The initial cost of an asset comprises its purchase price or construction cost, any costs directly attributable to bringing the asset into operation, the initial
estimate of any decommissioning obligation, if any, and, for qualifying assets, borrowing costs. The purchase price or the construction cost is the
aggregate amount paid and the fair value of any other consideration given to acquire the asset.
Expenditures on major maintenance, inspections, or overhauls are capitalised when the item enhances the life or performance of an asset above its original
standard. Such capitalised oil and natural gas interests generally represent costs incurred in developing proved and/or probable reserves and bringing in or
enhancing production from such reserves, and are accumulated on a field or geotechnical area basis. The carrying amount of any replaced or sold
component is derecognised. The costs of the day-to-day servicing of property, plant, and equipment are recognised in the Consolidated Statement of
Comprehensive Income as incurred. Where an asset or part of an asset that was separately depreciated is replaced and it is probable that future economic
benefits associated with the item will flow to the Company, the expenditure is capitalised and the carrying amount of the replaced asset is derecognised.
Inspection costs associated with major maintenance programs are capitalised and amortised over the period to the next inspection. All other maintenance
expenditures are expensed as incurred.
Exploration and evaluation expenditures
Pre-licence costs are recognised in the Consolidated Statement of Comprehensive Income in the period in which they are incurred.
Exploration and evaluation expenditures, including the costs of acquiring licences and directly attributable general and administrative costs, geological and
geophysical costs, acquisition of mineral and surface rights, technical studies, other direct costs of exploration (drilling, trenching, sampling, and evaluating
the technical feasibility and commercial viability of extraction) and appraisal are accumulated and capitalised as intangible exploration and evaluation
(“E&E”) assets.
A review of any areas classified and accounted for as E&E is performed on a quarterly basis to determine whether enough information exists to assess the
technical feasibility and commercial viability of the area. Where appropriate, the review may indicate that an area should be further subdivided because a
significant portion has already been explored, while a significant undeveloped portion with different traits (i.e. different zone, technical approach, play
type, etc.) remains that requires additional E&E activities to assess it for technical feasibility and commercial viability.
The assessment of technical feasibility and commercial viability is performed on an area level basis unless further subdivision is recommended.
Depending on the extent and complexity of the prospective play, many wells may need to be drilled and potentially significant E&E costs
accumulated prior to obtaining enough information to assess technical feasibility and commercial viability.
E&E costs are not amortised prior to the conclusion of appraisal activities. At the completion of appraisal activities, if technical feasibility is demonstrated
and commercial reserves are discovered, then the carrying value of the relevant E&E asset will be reclassified from a development and production asset
(“D&P”) into the cash generating unit (“CGU”) to which it relates, but only after the carrying value of the relevant E&E asset has been assessed for
impairment, and where appropriate, its carrying value adjusted. Typically, the technical feasibility and commercial viability of extracting a mineral resource is
considered to be demonstrable when proven or probable reserves are determined to exist. However, if the Company determines the area is not technically
feasible and commercially viable, accumulated E&E costs are expensed in the period during which the determination is made.
ii) Depletion and depreciation
The net carrying value of development and production assets is depleted using the unit of production method by reference to the ratio of production in
the year to the related proven and probable reserves, taking into account the estimated future development costs necessary to bring those reserves into
production. Future development costs are estimated taking into account the level of development required to produce the reserves. These estimates are
reviewed by independent reserve engineers at least annually.
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For other assets (see below), a straight-line basis is used over the assets’ estimated useful lives, as follows:
Fixtures and fittings
Office equipment
Vehicles
Software licenses
1–5 years
1-5 years
1–5 years
1–3 years
Depreciation methods, useful lives, and residual values are reviewed at each reporting date.
SDX Energy Plc / 2020 Annual Report & Accounts / 73
Financial Statements
Notes to the Consolidated Financial Statements
For the year ended 31 December 2020
4. Significant accounting policies (continued)
Impairment
f)
i) Financial assets
Recognition of impairment provisions under IFRS 9 is based on the expected credit losses (“ECL”) model. The ECL model is applicable to financial assets
classified at amortised costs and contract assets under IFRS 15: Revenue from Contracts with Customers. The measurement of ECL reflects an unbiased
and probability weighted amount that is available without undue cost or effort at the reporting date, about past events, current conditions and forecasts
of future economic conditions.
The Group applied the simplified approach to determine impairment of its trade and other receivables. The simplified approach requires expected lifetime
losses to be recognised from initial recognition of the receivables. It involves determining the expected loss rates using a provision matrix that is based on
the Group’s historical default rates observed over the expected life of the receivables and adjusted forward looking estimates. It is then applied to the gross
carrying amount of the receivables to arrive at the loss allowance for the period.
ii) Non-financial assets
Exploration and evaluation costs are tested for impairment when reclassified as D&P assets or whenever facts and circumstances indicate potential
impairment. Exploration and evaluation assets are tested separately for impairment. An impairment loss is recognised for the amount by which the
exploration and evaluation expenditure’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of the exploration
and evaluation expenditure’s fair value less the cost of disposal and its value in use.
Values of oil and gas properties and other property, plant, and equipment are reviewed for impairment when indicators of such impairment exist. If any
indication of impairment exists, an estimate of the asset’s recoverable amount is calculated. Assets are grouped for impairment assessment purposes at the
lowest level at which there are identifiable cash flows that are largely independent of the cash flows of other groups of assets (the CGU). The recoverable
amount of a CGU is the greater of its fair value less the cost of disposal and its value in use. Where the carrying amount of a CGU exceeds its recoverable
amount, the CGU is considered impaired and is written down to its recoverable amount. An impairment loss is charged to the income statement.
In assessing value in use, the estimated future cash flows are adjusted for the risks specific to the CGU and are discounted to their present value
using a pre-tax discount rate that reflects current market assessments of the time value of money.
For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognised impairment
losses may no longer exist or may have decreased, and, if such an indication exists, the Company makes an estimate of the recoverable amount. A previously
recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last
impairment loss was recognised. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot
exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years.
g) Share-based payments
The grant date fair value of options granted to employees is recognised as stock-based compensation expense, with a corresponding increase in
contributed surplus over the vesting period. Each tranche of options granted is considered a separate grant with its own vesting period and grant date
fair value. A forfeiture rate is estimated on the grant date and is adjusted to reflect the actual number of options that vest.
h) Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the senior operating decision-makers. These are
the Executive directors who, as a group, make strategic decisions regarding the Company.
i) Provisions
A provision is recognised if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it
is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future
cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. Provisions are not
recognised for future operating losses.
j) Decommissioning obligations
The Company’s activities can give rise to dismantling, decommissioning and site disturbance remediation activities. Provision is made for the estimated
cost of site restoration and capitalised in the relevant asset category.
Decommissioning obligations are measured at the present value of management’s best estimate of the expenditure required to settle the present
obligation at the balance sheet date. Following the initial measurement, the obligation is adjusted at the end of each period to reflect the passage of time
and changes in the estimated future cash flows underlying the obligation. The increase in the provision due to the passage of time is recognised as finance
costs, whereas increases/decreases due to changes in the estimated future cash flows are capitalised. Actual costs incurred upon settlement of the asset
retirement obligations are charged against the provision to the extent the provision is established.
k) Revenue
Revenue is measured at the fair value of the consideration received or receivable for goods in the normal course of business.
74 / SDX Energy Plc / 2020 Annual Report & Accounts
i) Sale of goods
Revenue from the sale of hydrocarbons is recognised when the Company has passed control of the hydrocarbons to the buyer, it is probable that
economic benefits associated with the transaction will flow to the Company, the price can be measured reliably, and the Company has no significant
continuing involvement and the costs incurred or to be incurred in respect of the transaction can be measured reliably. This is the point at which insurance
risk has passed to the buyer and the goods have been collected at the agreed location.
The performance obligation is satisfied when the hydrocarbons are delivered to the agreed location with the appropriate required documentation and the
customer accepts control of the shipment by signature. Prices are based on published indices, with agreed contractual adjustments for quality, marketing
fees, and other variables, or contractually agreed
ii) Provision of production services
Revenue from the provision of production services is recognised when the Company has passed control of the produced hydrocarbons to the buyer, it is
probable that economic benefits associated with the transaction will flow to the Company, the production service fee can be measured reliably, and the
Company has no significant continuing involvement and the costs incurred or to be incurred in respect of the transaction can be measured reliably. This is
when insurance risk has passed to the buyer and the goods have been collected at the agreed location.
The performance obligation is satisfied when the produced hydrocarbons are delivered to the agreed location with the appropriate required
documentation and the customer accepts control of the shipment by signature. Production services fees are based on published indices, with agreed
contractual adjustments for quality, marketing fees, and other variables.
iii) Royalties
In the Arab Republic of Egypt, under the terms of the Company’s Production Sharing Contracts (“PSCs”), the state is entitled to a percentage in kind
of hydrocarbons produced. The Company accounts for this production share as a royalty, netted against gross revenues.
In the Kingdom of Morocco, under the terms of the Company’s Petroleum Agreement with the Moroccan state, sales-based royalties become payable
when certain inception-to-date production thresholds are reached, according to the terms of each exploitation concession. The Company nets these
royalties against gross revenues.
Income tax
l)
Income tax expense comprises current and deferred tax. Income tax expense is recognised in the Consolidated Statement of Comprehensive Income
except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date,
and any adjustment to the tax payable in respect of previous years.
Pursuant to the terms of the Company’s Egyptian concession agreements, the corporate tax liability of the joint venture partners is paid by the
government-controlled corporations (“Corporations”) out of the profit oil attributable to the Corporations, and not by the Company. For accounting
purposes, the corporate taxes paid by the Corporations are treated as a benefit earned by the Company; the amount is included in net oil revenues and
in income tax expense, therefore having a net neutral impact on reported net income. Income tax expense is recognised in each interim period based
on the best estimate of the weighted average annual income tax rate expected for the full financial year.
The Company also has a production service agreement in Egypt relating to West Gharib. The Company’s subsidiary, SDX Energy Egypt (Meseda) Ltd.,
an Egyptian registered entity, is the SDX contracting party in this production service agreement. This entity pays corporate tax based on its taxable
income, according to this production service agreement, for the year using tax rates enacted or substantively enacted at the reporting date.
The Company’s Moroccan operations benefit from a 10-year corporation tax holiday from first production and no corporation tax is due on Moroccan
profits as at 31 December 2020.
Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised on the initial recognition of assets or liabilities in
a transaction that is not a business combination. Deferred tax is also not recognised for taxable temporary differences arising on the initial recognition of
goodwill. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that
have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to
offset, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle
current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.
A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the temporary difference can be used.
m) Earnings per share
Basic earnings per share is calculated by dividing the profit or loss attributable to common shareholders of the Company by the weighted average number of
common shares outstanding during the period. Diluted earnings per share is determined by adjusting the profit or loss attributable to common shareholders
and the weighted average number of common shares outstanding for the effects of dilutive instruments, such as options granted to employees.
n) Discontinued operations
A discontinued operation is a component of the entity that has been disposed of or is classified as held for sale and that represents a separate major line
of business or geographical area of operations, is part of a single co-ordinated plan to dispose of such a line of business or area of operations, or is a
subsidiary acquired exclusively with a view to resale. The results of discontinued operations are presented separately in the consolidated statement of
comprehensive income.
SDX Energy Plc / 2020 Annual Report & Accounts / 75
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Financial Statements
Notes to the Consolidated Financial Statements
For the year ended 31 December 2020
5. Determination of fair values
Some of the Company’s accounting policies and disclosures require the determination of fair value for both financial and non-financial assets and liabilities.
Fair values have been determined for measurement and/or disclosure purposes based on the methods set out below. When applicable, further information
about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.
The different levels of financial instrument valuation methods have been defined as:
Level 1 fair value measurements are based on unadjusted quoted market prices.
Level 2 fair value measurements are based on valuation models and techniques where the significant inputs are derived from quoted indices.
Level 3 fair value measurements are based on unobservable information.
The carrying value of cash and cash equivalents, trade and other receivables, trade and other payables, and loans and borrowings included in the
consolidated balance sheet approximate to their fair value because of the short-term nature of those instruments.
The fair value of employee stock options is measured using the Black-Scholes (non-market-based performance conditions) and Monte Carlo (market-
based performance conditions) option pricing models. Measurement inputs include the share price on the measurement date, exercise price of the
instrument, expected volatility based on the weighted average historic volatility (adjusted for changes expected as the result of publicly available
information), the weighted average expected life of the instruments based on historical experience and general option holder behaviour, expected
dividends, anticipated achievement of performance conditions, and the risk-free interest rate.
6. Financial risk management
Credit risk is the risk of financial loss to the Company if a customer, partner, or counterparty to a financial instrument fails to meet its contractual
obligations and arises principally from the Company’s receivables from joint venture partners, oil and natural gas customers, and cash held with banks.
The maximum exposure to credit risk at the end of the period is as follows:
Credit risk
Carrying amount
31 December 31 December
US$’000s 2020 2019
Cash and cash equivalents 10,056 11,054
Trade and other receivables (1) 17,212 20,298
27,268 31,352
Total
(1) excludes prepayments of US1.4 million which are included in the Consolidated Balance Sheet as trade and other receivables but which are not categorised as financial assets as summarised above (2019: US$1.5 million)
a) Credit risk
Trade and other receivables
All the Company’s operations are conducted in Egypt and Morocco. The Company’s exposure to credit risk is influenced mainly by the individual
characteristics of each counterparty.
The Company applies the IFRS 9 simplified model for measuring the expected credit losses, which uses a lifetime expected loss allowance and are
measured on the days past due criterion. Having reviewed past payments, combined with the credit profile of its existing trade debtors, to assess the
potential for impairment, the Company has concluded that this is insignificant because there has been no history of default or disputes arising on invoiced
amounts since inception. As a result, the credit loss percentage is assumed to be almost zero. No provision for doubtful accounts against these sales has
been recorded as at 31 December 2020 (31 December 2019: no provision).
The maximum exposure to credit risk for loans and receivables at the reporting date by type of customer was:
Carrying amount
31 December 31 December
US$’000s 2020 2019
Government of Egypt-controlled corporations 6,205 7,489
Government of Morocco-controlled corporations 4,508 3,909
Third-party gas customers 4,289 3,703
Joint venture partners 905 4,025
Other (1) 1,305 1,172
17,212 20,298
Total
(1) excludes prepayments of US$1.4 million which are included in the Consolidated Balance Sheet as trade and other receivables but which are not categorised as financial assets as summarised above (2019: US$1.5 million)
76 / SDX Energy Plc / 2020 Annual Report & Accounts
US$6.2 million of current receivables relates to oil, gas, and condensate/NGL sales and production service fees that are due from EGPC, GPC, and EGAS
(2019: US$7.5 million), Government of Egypt-controlled corporations. The Company expects to collect outstanding receivables of US$4.8 million (2019:
US$2.2 million) for South Disouq and US$1.4 million for West Gharib (2019: US$2.8 million) in the normal course of operations. As at 31 December 2019,
there were US$2.5 million of receivables associated with the NW Gemsa concession, which were collected ahead of the asset’s disposal in Q3 2020. The
cash collection of these receivables is included in cash generated from discontinued operations in the Consolidated Statement of Cash Flows.
ONHYM, a Government of Morocco-controlled corporation, owes US$4.5 million, which relates to its outstanding share of well completion and connection
costs, and production costs. Of this US$4.5 million, US$3.9 million is long-dated. A payment of US$0.5 million was received from ONHYM during Q1
2020. A payable of US$4.2 million (2019: US$3.6 million) to ONHYM is also held on the Consolidated Balance sheet.
US$4.3 million is owing from third-party gas customers in Morocco and is expected to be collected within agreed credit terms.
Subsequent to 31 December 2020, the Company collected US$8.0 million of trade receivables from those outstanding at 31 December 2020;
US$3.0 million from EGAS for South Disouq, US$0.7 million from GPC for West Gharib, and US$4.3 million from third-party gas customers in Morocco.
The joint venture partner current accounts represent the net of monthly cash calls paid less billings received. At 31 December 2020, US$0.9 million was
receivable from the joint venture partner in the South Disouq concession (2019: US$2.1 million), representing both billed and unbilled amounts. As at
31 December 2019, the joint venture partner balance included an overcall of US$1.8 million due from the joint venture partner in the NW Gemsa
concession, which was subsequently reduced by Q1 2020 billings to US$1.0 million. This asset was sold in Q3 2020, see note 23.
The other receivables of US$1.3 million consist of US$0.3 million for Goods and Services Tax (“GST”)/Value Added Tax (“VAT”), US$0.6 million
for deposits, and US$0.4 million for other items.
As at 31 December 2020 and 31 December 2019, the Company’s trade and other receivables, other than prepayments, are aged as follows:
Carrying amount
31 December 31 December
US$’000s 2020 2019
Current (less than 90 days) 13,108 16,713
Past due (more than 90 days) 4,104 3,585
17,212 20,298
Total
Current trade and other receivables are unsecured and non-interest-bearing. The balances that are past due are not considered impaired.
Current trade and other receivables past due (more than 90 days old) have increased by US$0.5 million compared to 31 December 2019. This increase
is owing to ONHYM’s share of 2019/20 drilling campaign costs and operating expenses.
(b) Foreign currency risk
Currency risk is the risk that the fair value of future cash flows will fluctuate because of changes in foreign exchange rates. The reporting and functional
currency of the Company is United States dollars (“US$”). Most of the Company’s operations are in foreign jurisdictions and, as a result, the Company is
exposed to foreign currency exchange rate risk on some of its activities, primarily on exchange fluctuations between the Egyptian pound (“EGP”) and the
US$, the Moroccan dirham (“MAD”) and the US$, and the British pound (“GBP”) and the US$. Most capital expenditures are incurred in US$, EGP and
MAD, and oil, natural gas, NGL and service fee revenues are received in US$, EGP and MAD. The Company can use EGP and MAD to fund its Egyptian
and Moroccan general and administrative expenses and to part-pay cash requirements for both capital and operating expenditure, thereby reducing the
Company’s exposure to foreign exchange risk during the period.
The table below shows the Company’s exposure to foreign currencies for its financial instruments:
Total per FS(1) US$ EGP MAD GBP Other
As at 31 December 2020 US$ equivalent
Cash and cash equivalents 10,056 814 2,822 4,706 1,699 15
Trade and other receivables (2) 17,212 7,951 - 8,940 290 31
Trade and other payables (20,120) (15,851) (239) (2,134) (1,804) (92)
Current income taxes (241) - (241) - - -
Balance sheet exposure 6,907 (7,086) 2,342 11,512 185 (46)
(1) FS denotes financial statements
(2) Excludes prepayments
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SDX Energy Plc / 2020 Annual Report & Accounts / 77
Financial Statements
Notes to the Consolidated Financial Statements
For the year ended 31 December 2020
6. Financial risk management (continued)
(b) Foreign currency risk (continued)
The average exchange rates during the years ended 31 December 2020 and 2019 were:
Average: 1 January 2020 to 31 December 2020 Average: 1 January 2019 to 31 December 2019
USD/EGP USD/GBP USD/MAD USD/EGP USD/GBP USD/MAD
Period average 15.7596 0.7869 9.5035 Period average 16.7656 0.7838 9.6178
The exchange rates as at 31 December 2020 and 2019 were:
Period end: 31 December 2020 Period end: 31 December 2019
USD/EGP USD/GBP USD/MAD USD/EGP USD/GBP USD/MAD
Period end 15.6700 0.7327 8.9048 Period end 15.9900 0.7585 9.5932
c) Liquidity risk
Liquidity risk is the risk that the company will not be able to meet its financial obligations as they fall due. The company’s approach to managing liquidity is
to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without
incurring unacceptable losses or risking damage to the company’s reputation.
Typically, the company ensures that it has sufficient cash on demand to meet expected operational expenses, including the servicing of financial
obligations; this excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters and political unrest.
To achieve this objective, the company prepares annual capital expenditure budgets, which are regularly monitored and updated as considered necessary.
Further, the company utilises authorisations for expenditures on projects to further manage capital expenditure and has a Board of Director approved
signing authority matrix.
The tables below analyse the group’s financial liabilities into relevant maturity groupings based on their contractual maturities.
The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances
as the impact of discounting is not significant.
Between Between Total Carrying
Less than 6 to 12 1 and 2 and Over contractual amount
6 months months 2 years 5 years 5 years cash flows liabilities
Contractual maturities of financial liabilities US$’000s US$’000s US$’000s US$’000s US$’000s US$’000s US$’000s
At 31 December 2020
Trade and other payables 20,120 - - - - 20,120 20,120
Decommisioning liability - - - 5,979 2,160 8,139 6,189
Lease Liability 227 213 439 1,187 2,066 1,421
Total liabilities 20,347 213 439 7,166 2,160 30,325 27,730
At 31 December 2019
Trade and other payables 25,724 - - - - 25,724 25,724
Decommisioning liability - 317 - 5,554 - 5,871 5,604
Lease Liability 543 250 437 894 - 2,124 1,627
Total liabilities 26,267 567 437 6,448 - 33,719 32,955
7. Cash and cash equivalents
Carrying amount
31 December 31 December
US$’000s 2020 2019
Cash and bank balances 8,402 9,451
Restricted cash (1) 1,654 1,603
Total cash and cash equivalents 10,056 11,054
(1) Cash collateral of US$1.7 million (2019: US$1.6 million) is held at the bank to cover bank guarantees for minimum work commitments on the Company’s Moroccan concessions. These guarantees are subject to forfeiture in
certain circumstances if the Company does not fulfil its minimum work obligations.
Inventory
8.
The inventory balance was US$8.4 million as at 31 December 2020 compared to US$8.0 million 31 December 2019. During the period US$2.8 million of
inventory was consumed in the Morocco and South Disouq drilling campaigns. This was offset by US$1.5 million of drilling inventory additions in Morocco,
which are expected to be consumed in the upcoming 2021 drilling campaign, and US$1.7 million of additions at South Disouq, associated with the field
development and drilling materials in preparation for 2021 activities.
78 / SDX Energy Plc / 2020 Annual Report & Accounts
9. Property, plant and equipment
Oil and gas
US$’000s properties Other Total
Cost:
Balance at 1 January 2019 105,863 1,380 107,243
Additions 5,387 199 5,586
Transfer from exploration and evaluation assets 47,556 - 47,556
Balance at 31 December 2019 158,806 1,579 160,385
Additions 3,330 103 3,433
Transfer from exploration and evaluation assets 11,108 - 11,108
Balance at 31 December 2020 173,244 1,682 174,926
Accumulated depletion, depreciation, amortisation and impairment:
Balance at 31 December 2018 (58,009) (554) (58,563)
Depletion, depreciation and amortisation for the year (25,165) (435) (25,600)
Impairment expense (8,327) - (8,327)
Balance at 31 December 2019 (91,501) (989) (92,490)
Depletion, depreciation and amortisation for the year (24,424) (132) (24,556)
Balance at 31 December 2020 (115,925) (1,121) (117,046)
NBV Property, plant and equipment as at 31 December 2019 67,305 590 67,895
NBV Property, plant and equipment as at 31 December 2020 57,319 561 57,880
During the year ended 31 December 2020, additions of US$3.4 million were incurred as follows. US$1.5 million related to costs incurred in the South
Disouq development project for additional pipeline work, training fees, and insurance spares for the CPF. In West Gharib, US$0.4 million was incurred for
well drilling costs and workovers and, in Morocco US$1.4 million was incurred relating to well decommissioning, well tie-ins and customer connection
costs. US$0.1 million of other assets were added.
Out of the reclassification of US$11.1 million from exploration and evaluation (“E&E”) assets, US$3.8 million relates to the cost of two wells, SAH-3 and
OYF-2, drilled in Morocco and US$7.3 million to the cost of the SD-12X discovery in Egypt, including the flow line from this well to the CPF. These wells
were transferred to PP&E as commercial discoveries during 2020. The transfer includes an allocation of 3D seismic data costs.
Impairment assessment
At the reporting date, management performed an impairment indicator assessment on its South Disouq asset and concluded that due to a revised
subsurface interpretation of the reservoirs within the concession leading to lower estimated recoverable reserves, and increased costs relating to earlier
than expected sand and water production, the asset should be tested for impairment.
The impairment test was carried out in accordance with the Company’s accounting policy stated in note 3. The recoverable amount of the field has been
determined based on a fair value less costs to dispose calculation. This calculation requires the use of estimates. The present values of future cash flows
were computed by applying expected prices for gas (contracted price) and condensate (forecast prices) reserves to estimated future production of proved
and probable reserves. The present value of estimated future net revenues is computed using a discount factor of 12.5%. The discount rate used reflects
the specific risks relating to the underlying cash generating unit.
Based on this calculation for South Disouq, no impairment charge has been recognised. However, in the event that planned development wells, such as
the Ibn Yunus-2X, or exploration wells, are unsuccessful, it is possible that an impairment charge will be recognised in a future period. If at the reporting
date the IY-2X well had been drilled, and the results had shown that the recoverable hydrocarbons from the entire Ibn Yunus field were c.35% lower than
those estimated in the recoverable amount, an impairment charge would have been recognised.
The difference between the US$3.4 million addition disclosed above and the US$18.2 million cash outflow from property, plant, and equipment
expenditure in the Consolidated Statement of Cash Flows is the result of the cash flow reflecting the US$11.1 million of E&E expenditure in Morocco for
the SAH-3 and OYF-2 discoveries and SD-12X discovery in Egypt. These discoveries were ultimately transferred to PP&E from E&E additions, together
with the normal timing differences of recognising additions on an accruals basis and the timing of the actual payment of capital expenditure creditors.
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Financial Statements
Notes to the Consolidated Financial Statements
For the year ended 31 December 2020
10. Exploration and evaluation assets
US$’000s
Balance at 1 January 2019 39,128
Additions 37,403
Transfer to property, plant and equipment (47,556)
Exploration and evaluation expense (10,255)
Balance at 31 December 2019 18,720
Additions 21,300
Transfer to property, plant and equipment (11,108)
Exploration and evaluation expense (4,457)
Balance at 31 December 2020 24,455
During the year ended 31 December 2020, E&E additions totalled US$21.3 million. US$8.5 million of this amount related to South Disouq, covering
the dry-hole drilling costs of SD-6X (Salah-55% working interest), amounting to US$1.2 million, and the drilling, completion, testing, and tie-in costs
of SD-12X (Sobhi-100% working interest), as well as a US$0.3 million development lease bonus, in total amounting to US$7.3 million. Within the US$8.5
million total, decommissioning costs of US$0.2 million have been recognised, covering both wells. The US$7.3 million cost of SD-12X was transferred
to PP&E during the year as a commercial discovery.
Additions in Morocco of US$12.8 million relate primarily to the drilling campaign that was completed in Q1 2020, of which US$3.8 million represents
the costs of the SAH-3 and OYF-2 wells (including allocated 3D seismic), which were commercial discoveries and have been transferred to PP&E.
For the year ended 31 December 2020, exploration and evaluation expenses in the Consolidated Statement of Comprehensive Income stood at
US$5.8 million. The following exploration and evaluation expenses of US$4.5 million were included in this total:
• the write-off of a non-commercial well, SD-6X, which was drilled during the South Disouq Q1 2020 exploration drilling campaign, including associated
3D seismic costs (US$2.3 million); and
• the write-off of a non-commercial well, SAH-5, which was drilled in Q1 2020 during the 2019/20 Morocco drilling campaign, including associated
3D seismic costs (US$2.2 million).
The remaining expense of US$1.3 million was for new venture activities during the period, comprising mostly internal management time.
The difference between the US$21.3 million disclosed above and the US$10.3 million exploration and evaluation cash expenditure in the Consolidated
Statement of Cash Flows relates to the 2020 additions included in assets transferred to PPE and the timing of payment to capital expenditure creditors.
11. Investments
The Company owns a 50% equity interest in Brentford Oil Tools LLC (“Brentford”), an oilfield services business incorporated in Egypt, over which it
exercises joint control. Brentford owns all the assets it uses to provide its services and is legally responsible for settling its liabilities. In the current and
comparative period, Brentford has provided services only to its shareholders, but it is not contractually obliged to do so. In the past, it has contracted
with third parties and continues to seek future opportunities. On the balance of facts, the Company has concluded that Brentford is a joint venture under
IFRS 11-“Joint Arrangements” and the Company’s interest is equity accounted for. The investment is reviewed regularly for indicators of impairment.
No impairment was identified for the years ended 31 December 2020 and 31 December 2019.
The following table summarises the changes in investments for the years ended 31 December 2020 and 31 December 2019:
Carrying amount
31 December 31 December
US$’000s 2020 2019
Investments, beginning of period 3,916 3,394
Dividends received (822) (639)
Share of operating income 696 1,161
Investments, end of period 3,790 3,916
The following table summarises the Company’s 50% interest in the assets, liabilities, revenue, and operating income of Brentford as at 31 December 2020
and 31 December 2019:
31 December 31 December
US$’000s 2020 2019
Total assets 2,296 2,823
Total liabilities 229 348
Revenue 1,222 1,915
Net income 696 1,161
During the years ended 31 December 2020 and 31 December 2019, 50% of Brentford’s revenue was earned from fees charged to the Company and 50%
to the Company’s partner in the West Gharib concession.
80 / SDX Energy Plc / 2020 Annual Report & Accounts
12. Trade and other payables
Carrying amount
31 December 31 December
US$’000s 2020 2019
Trade payables 8,466 11,634
Accruals 5,001 9,213
Joint venture partners 5,272 4,105
Deferred income - 258
Other payables 1,381 772
Total trade and other payables 20,120 25,982
Trade payables comprise billed services and goods. As at 31 December 2020, they consisted predominantly of the Morocco and South Disouq drilling
campaign creditors and royalties payable to the Moroccan government. The US$3.1 million decrease in trade payables from the balance as at 31 December
2019 is mainly the result of payments made during the year relating to the 2019/20 Morocco drilling campaign.
Accruals include amounts for products and services received that have yet to be invoiced. The US$4.2 million decrease period-on-period primarily reflects
invoicing during the year ended 31 December 2020 for the value of work undertaken but not billed as at December 2019 for the Morocco drilling
campaign, partly offset by an accrual for the SD-12X pipeline project.
Joint venture partners comprise partner current accounts of US$1.1 million for West Gharib (2019: US$0.5 million) and US$4.2 million due to ONHYM
for the Morocco concessions (2019: US$3.6 million). A receivable of US$4.5 million (2019: US$3.9 million) from ONHYM is also held on the Consolidated
Balance sheet. The joint venture partner current accounts represent the net of monthly cash calls paid less billings received.
Other payables of US$1.4 million (2019: US$0.8 million) comprise withholding tax payable from the Moroccan drilling campaign of US$0.9 million, an
estimated liability of US$0.2 million related to the relinquishment of the Shukheir Marine concession, employee costs accrued, and other sundry creditors.
The difference between the decrease of US$5.9 million in trade and other payables in the Consolidated Balance Sheets as at 31 December 2020 and
31 December 2019 and the line item in the Consolidated Statement of Cash Flows pertaining to the increase in trade and other payables of
US$3.0 million, is due to the fact that trade and other payables in the Consolidated Balance Sheets include capital expenditure items and the movement
in the Consolidated Statement of Cash Flows relates only to the movement in operational expenditure and G&A creditors.
13. Decommissioning liability
As at 31 December 2020, the total future undiscounted cash flows relating to the decommissioning of Moroccan assets amounted to US$5.4 million, to be
incurred up to 2023, and the liability was discounted using a risk-free rate of 2%. This figure includes the decommissioning costs of three new wells drilled
in Q1 2020. As at 31 December 2020, the discounted amount of the liability was US$5.0 million.
Following the drilling of the exploration and appraisal wells at South Disouq, as well as the construction of the CPF, the Company has an obligation to
decommission these assets under the terms of the concession agreement. The total future undiscounted cash flows amounted to US$3.0 million, to be
incurred in 2023, and the liability was discounted using a risk-free rate of 9.5%. This includes the decommissioning costs of SD-12X and SD-6X wells
drilled in 2020. As at 31 December 2020, the discounted amount of the liability was US$1.2 million.
The discounted value of the cash flows above amounts to US$6.2 million as at 31 December 2020 and is shown below:
Carrying amount
31 December 31 December
US$’000s 2020 2019
Decommissioning liability, beginning of period 5,604 5,167
Recognition of provision 688 1,485
Changes in estimate (305) (293)
Utilisation of provision - (808)
Accretion 202 53
Decommissioning liability, end of period 6,189 5,604
Of which:
Current 327 317
Non-current 5,862 5,287
No decommissioning liability is recorded for the Company’s West Gharib asset under the terms of the Production Services Agreement.
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Financial Statements
Notes to the Consolidated Financial Statements
For the year ended 31 December 2020
14. Income tax-current and deferred
According to the terms of the Company’s Egyptian Production Sharing Contracts (“PSCs”), the corporate tax liability of the joint venture partners is paid
by the government-controlled corporations (“Corporations”) that participate in these PSCs, out of the profit oil attributable to the Corporations, and not
by the Company. For accounting purposes however, the corporate taxes paid by the Corporations are treated as a benefit earned by the Company, with the
amount being “grossed up” and included in net oil revenues and the income tax expense of the Company.
The Company also has a Production Services Agreement (“PSA”) related to West Gharib, with the legal title held by SDX Energy Egypt (Meseda) Ltd.
(“SDX West Gharib”), an Egyptian incorporated entity. The Company is governed by the laws and tax regulations of the Arab Republic of Egypt and pays
corporate taxes on the adjusted profit of SDX West Gharib.
The current income tax expense in the Consolidated Statement of Comprehensive Income for the year ended 31 December 2020 relates to income tax
on South Disouq’s PSC and income tax relating to the Company’s PSA in West Gharib.
The current income tax liability of US$0.2 million in the Consolidated Balance Sheet relates to the Company’s PSA in West Gharib.
The Company’s Moroccan operations benefit from a 10-year corporation tax holiday from first production and no such taxation is due on Moroccan
profits as at 31 December 2020.
The analysis of the expense for the year is as follows:
Year ended 31 December
US$’000s 2020 2019
Current tax
Corporation tax charge on income/(loss) for the year 5,468 2,180
Adjustments in respect of prior periods (214) 69
Total current tax 5,254 2,249
Deferred tax
Origination and reversal of temporary differences - -
Adjustments in respect of prior periods - -
Total deferred tax - -
Total tax expense 5,254 2,249
The differences between the total tax charge shown above and the amount calculated by applying the standard rate of UK corporation tax to the
(loss)/income before tax is detailed below. The tax assessed for the current and comparative year have different standard rate of corporation tax applied.
The current year is the standard rate of corporation tax in the United Kingdom of 19%.
Year ended 31 December
US$’000s 2020 2019
Income/(loss) before income taxes 1,428 (15,541)
Standard rate of corporation tax 19% 19%
Expected income taxes 271 (2,953)
Adjustments:
Non-deductible items 3,272 2,284
Unrecognised income tax benefit 1,457 1,811
Foreign tax differential 469 1,038
Prior year adjustments (215) 69
Total current and deferred income tax 5,254 2,249
The components of the deferred income tax assets and liabilities at 31 December 2020 and 2019 include the following:
Year ended 31 December
US$’000s 2020 2019
Deferred tax assets/(liabilities):
Investments (14) (14)
Property, plant and equipment (448) (448)
Other
172 172
Deferred income tax liability (290) (290)
The Company has US$73.3 million million of non-capital losses available at 31 December 2020 (2019: US$71.8 million) to shelter future taxable income,
the majority of which were incurred in Canada and expire between 2026 and 2035. The Company has not recognised any deferred tax assets as at
31 December 2020 and 2019 primarily relating to its Canadian business as it has determined that its deferred tax assets are not probable to be realised
from current operations.
82 / SDX Energy Plc / 2020 Annual Report & Accounts
15. Share capital
The share capital of the Group is represented by the share capital of the parent company, SDX Energy Plc. This company was incorporated on 20 March
2019 to act as the holding company of the Group, issuing 500,000 shares at the nominal value of £0.10. Prior to this date, the share capital of the Group
was represented by the share capital of the previous parent, SDX Energy Inc..
On 4 April 2019, the Company’s 500,000 issued shares of nominal value £0.10 were consolidated into 250,000 ordinary shares at a nominal value of
£0.20 per share. On 28 May 2019, the Company issued a further 204,473,041 shares to execute a share-for-share acquisition of the entire share capital
of SDX Energy Inc., 204,723,041 shares in total. There were no changes in rights or proportion of control exercised as a result of this transaction. A merger
reserve of US$37.0 million was created as a result of this transaction. The merger reserve represents the difference between the share capital of SDX
Energy Inc. immediately prior to the share-for-share exchange and the share capital of SDX Energy Plc immediately after the share-for-share exchange.
On 4 June 2019, the High Court of Justice Chancery Division made an order confirming the reduction of share capital of SDX Energy Plc pursuant to
section 648 of the Companies Act 2006 by cancelling the paid up capital of the Company to the extent of 19 pence on each ordinary share of £0.20 in
the issued share capital of the Company (the “Capital Reduction”). As a result of the Capital Reduction, the nominal value of ordinary shares in the issued
share capital of the Company is £0.01 each, with US$49.3 million transferred from share capital to retained earnings. There was no change in the number
of the Company’s ordinary shares in issue.
The purpose of the Capital Reduction was to restructure the issued share capital and reserves of the Company and to create distributable reserves
to facilitate the payment of future dividends, when it becomes commercially prudent to do so. The Company’s retained earnings are not equal to
its distributable profits.
31 December 2020 31 December 2019
Number Number
of shares Stated value of shares Stated value
(’000s) (US$’000s) (’000s) (US$’000s)
Balance, beginning of period 204,723 2,593 204,723 88,899
Issue of common shares 655 8 - -
Creation of merger reserve - - - (37,034)
Reduction of share capital - - - (49,272)
Balance, end of period 205,378 2,601 204,723 2,593
Weighted average shares outstanding 204,969 204,723
The share-for-share exchange had no impact on the number of shares in issue.
During September 2020, the Company issued a total of 655,028 ordinary shares of £0.01 to its Executive Directors and certain other employees as part
of the bonus awarded for 2019 performance. These shares were issued at a price of £0.1647 per share, representing the 60-day volume weighted average
price of a share on 25 September 2020. US$0.08 million was posted to the share capital during the period, with the remainder recognised as share premium.
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Financial Statements
Notes to the Consolidated Financial Statements
For the year ended 31 December 2020
16. Stock-based compensation
The stock-based compensation charge of US$0.2 million recorded in the Consolidated Statement of Comprehensive income represents the IFRS 2 charge
which is associated with the Long-Term Incentive Plan (“LTIP”).
During the year ended 31 December 2020, options of up to 6,340,116 ordinary shares in the Company were issued under the LTIP to Executive Directors
and certain other key employees. In the same period, 263,548 LTIP options vested from the award made in July 2017, none have yet been exercised.
From this award, 1,489,230 LTIP options did not vest.
Stock option plan
The Company has a stock option plan that entitles officers, directors, employees, and certain consultants to purchase shares in the Company.
Stock-based compensation expense is the amortisation over the vesting period of the fair value of stock options granted to employees, directors, and key
consultants of the Company. The fair value of all options granted is estimated using the Black-Scholes option pricing model. Each tranche of options in an
award is considered a separate award with its own vesting period and grant date fair value. Compensation costs are expensed over the vesting period, with
a corresponding increase in share-based payment reserve. When stock options are exercised, the cash proceeds and the amount previously recorded as
contributed surplus are recorded as share capital.
In the year ended 31 December 2020, 795,000 options previously awarded lapsed. During the year to 31 December 2019, 106,667 options were cancelled
and 853,333 options previously awarded lapsed.
On 28 May 2019, as part of the share-for-share exchange transaction between SDX Energy Inc. and SDX Energy Plc, each outstanding SDX Energy Inc.
share option that was not duly exercised at that date was “rolled over” and following completion of the transaction entitled the holder to acquire the same
number of SDX Energy Plc shares. The exercise price of each option was converted at the GBP/CAD rate prevailing on the date of the transaction.
The number and weighted average exercise price of stock options for the Company’s stock option plan is as follows:
Number Weighted average
of options exercise price
(’000s) (GBP£)
Outstanding 1 January 2019 2,115 0.38
Lapsed during the year (853) 0.37
Cancelled during the year (107) 0.45
Outstanding 31 December 2019 1,155 0.42
Exercisable 31 December 2019 942 0.38
Outstanding 1 January 2020 1,155 0.42
Lapsed during the year (795) 0.37
Outstanding 31 December 2020 360 0.42
Exercisable 31 December 2020 360 0.42
The exercise price range of the outstanding options under the stock option plan as at 31 December 2020 is between £0.21 and £0.45.
Long-Term Incentive Plan (“LTIP”)
On 31 July 2017, the Company established a new Long-Term Incentive Plan and issued awards to its Executive Directors and certain other key employees.
The Company recognises the need to ensure that Executive Directors and key employees from its operational, commercial, technical, and financial
divisions, who are critical to executing the Company’s strategy over the next phase of its development, are retained and incentivised to generate long-term
value for shareholders.
The LTIP Awards and CSOP Options granted under the Plan take the form of a base award over a number of common shares. These awards will normally
vest on the third anniversary of the date of grant of the awards, subject to meeting certain strategic, operational, financial, and shareholder return
performance criteria and the continued employment of the participant. The awards for the Executive Directors are subject to a further two-year holding
period from the date of vesting. There are clawback provisions contained in the rules of the Plan that can be applied to awards made to all participants.
As at the date of these Consolidated Financial Statements, the maximum number of shares that can vest for the current CEO and CFO is 2,003,523 and
912,593 respectively. The awards made to the former CEO were cancelled on his departure in Q2 2019, with the previously recognised expense credited
to the Consolidated Statement of Comprehensive Income.
On 28 May 2019, as part of the share-for-share exchange transaction between SDX Energy Inc. and SDX Energy Plc, any options granted under LTIP
Awards and CSOP Options by SDX Energy Inc. were replaced with new options in SDX Energy Plc. There were no changes in the vesting conditions from
the previous awards.
Based on grants to 19 March 2021, the maximum potential number of common shares that can vest to the executive directors and other selected
employees under the LTIP were, in aggregate, 7,121,545. All these options are outstanding as at 31 December 2020 and 19 March 2021, and 1,236,175
have vested.
The number of ordinary shares that may be issued or reserved for issuance under the awards granted pursuant to the LTIP, together with all common
shares that may be issued under options granted pursuant to the Company’s stock option plan, may not exceed 10% of the Company’s issued and
outstanding common shares at the time of grant.
84 / SDX Energy Plc / 2020 Annual Report & Accounts
17. Revenue, net of royalties
Year ended 31 December
US$’000s 2020 2019
West Gharib production service fee revenues 7,328 14,390
South Disouq gas sales revenue 26,891 3,735
Royalties (9,115) (1,270)
Net South Disouq gas revenue 17,776 2,465
Morocco gas sales revenue 19,246 18,258
Royalties (730) (736)
Net Morocco gas sales revenue 18,516 17,522
Net other products revenue 2,448 445
Total net revenue before tax 46,068 34,822
The production service fees relate to West Gharib, which is governed by an Egyptian PSA.
The Company sells gas production from the South Disouq concession to the Egyptian national gas company, EGAS, at a fixed price of US$2.65/MMbtu
(approximately US$2.85/Mcf). The royalties are those attributable to the government, taken in accordance with the fiscal terms of the PSC. The net other
products revenue relates to condensate sales from this concession.
The Moroccan gas sales revenue is derived from a Petroleum Agreement with the Moroccan state. Sales-based royalties become payable when certain
inception-to-date production thresholds are reached, according to the terms of each exploitation concession. During Q3 2018, natural gas production
from the Ksiri exploitation concession exceeded such a threshold, resulting in the recognition of royalties amounting to 5% of revenue from this
concession from that point forward. Royalty payments are made directly to the Government of Morocco.
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Financial Statements
Notes to the Consolidated Financial Statements
For the year ended 31 December 2020
18. General and administrative expenses
Year ended 31 December
US$’000s 2020 2019
Wages and employee costs 6,527 7,678
Consultants-inc. PR/IR 514 517
Legal fees 225 387
Audit, tax and accounting services 767 684
Public company fees 576 652
Travel
156 240
Office expenses 492 383
IT expenses 360 546
Service recharges (5,645) (6,506)
Ongoing general and administrative expenses 3,972 4,581
Transaction costs 152 1,079
Total net G&A 4,124 5,660
The average monthly number of employees (including executive directors) was 63 (2019: 66). Their aggregate remuneration comprised:
Year ended 31 December
US$’000s 2020 2019
Wages and salaries 3,529 4,197
Social security costs 434 507
Other pension costs 154 167
4,117 4,871
Total
The fees payable to the company’s auditor and its associates for the audit of the company’s annual accounts are as follows:
Year ended 31 December
US$’000s 2020 2019
The audit of the company 182 114
Audit related assurance services 15 15
The audit of subsidiaries 71 148
Total audit fees 268 277
Taxation compliance services 61 54
Corporate finance services - 78
Other services 32 20
Total non-audit fees 93 152
19. Loss per share
Basic income/(loss) per share is calculated by dividing the income attributable to shareholders of the Company by the weighted average number of ordinary
shares in issue during the period. Diluted per share information is calculated by adjusting the weighted average number of ordinary shares outstanding to
assume conversion of all dilutive potential ordinary shares. The Company computes the dilutive impact of common shares by assuming that the proceeds
received from the pro forma exercise of in-the-money stock options or warrants are used to purchase common shares at average market prices.
Year ended 31 December
US$’000s 2020 2019
Net loss before comprehensive loss for the year (2,058) (18,186)
Weighted average amount of shares
204,969 204,723
-Basic
-Diluted 204,969 204,723
Per share amount
-Basic
$(0.010) $(0.089)
-Diluted $(0.010) $(0.089)
86 / SDX Energy Plc / 2020 Annual Report & Accounts
20. Segmental reporting
The Company’s operations are managed on a geographic basis, by country. The Company is engaged in one business of upstream oil and gas exploration
and production. The Executive Directors are the Company’s chief operating decision maker within the meaning of IFRS 8.
The segment assets and liabilities as at 31 December 2020 and 31 December 2019 are as follows:
Year ended 31 December 2020 Year ended 31 December 2019
US$’000s Egypt Morocco Unallocated(1) Total Egypt Morocco Unallocated(1) Total
Revenue 27,552 18,516 - 46,068 17,300 17,522 - 34,822
Direct operating expense (7,722) (1,813) - (9,535) (4,685) (1,910) - (6,595)
Netback (pre tax) 19,830 16,703 - 36,533 12,615 15,612 - 28,227
General and administrative expenses (2,676) (2,557) 1,109 (4,124) (104) (1,683) (3,873) (5,660)
Stock-based compensation - - (231) (231) - - (178) (178)
Share of profit from joint venture 696 - - 696 1,161 - - 1,161
EBITDAX 17,850 14,146 878 32,874 13,672 13,929 (4,051) 23,550
Exploration and evaluation expense (2,261) (2,196) (1,352) (5,809) (8,739) (1,516) (1,172) (11,427)
Depletion, depreciation and amortisation (14,144) (10,476) (572) (25,192) (3,805) (14,098) (774) (18,677)
Impairment expense - - - - (8,327) - - (8,327)
Operating income/(loss) 1,445 1,474 (1,046) 1,873 (7,199) (1,685) (5,997) (14,881)
(1) Unallocated expenditure, assets and liabilities include amounts of a corporate nature and not specifically attributable to a geographical segment.
The segment assets and liabilities as at 31 December 2020 and 31 December 2019 are as follows:
31 December 2020 31 December 2019
US$’000s Egypt Morocco Unallocated(1) Total Egypt Morocco Unallocated(1) Total
Segment assets 53,732 63,599 7,272 124,603 62,327 62,174 8,517 133,018
Segment liabilities (6,755) (19,652) (1,854) (28,261) (7,730) (25,133) (2,124) (34,987)
(1) Unallocated expenditure, assets and liabilities include amounts of a corporate nature and not specifically attributable to a geographical segment.
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21. Commitments and contingencies
Pursuant to the concession and production service fee agreements in Egypt and Morocco, the Company is required to perform certain minimum
exploration and development activities that include the drilling of exploration and development wells. These obligations have not been provided
for in the Consolidated Financial Statements.
In Morocco, the commitments are for one exploration well in Lalla Mimouna Sud and the acquisition of 50km2 of 3D seismic data, and one exploration
well, the acquisition of 100km2 of 3D seismic data, and the re-processing of 150km of 2D seismic data in Moulay Bouchta Ouest. The estimated cost of
these commitments is US$8.2 million.
In Egypt, there were no remaining commitments as at 31 December 2020. In 2021, subject to ratification by the Egyptian Parliament, the Company
expects to enter into a two-year exploration concession extension period for part of the South Disouq concession, to enable it to target additional
identified prospectivity. Upon ratification, the Company will pay its 55% share of a US$1.0 million signature bonus and be committed to drill two
exploration wells, with a combined dry-hole cost of approximately US$4.0 million (gross).
The Group operates in several countries and, accordingly, it is subject to the various tax and legal regimes in the countries in which it operates. From time
to time, the Group is subject to a review of its related tax filings and in connection with such reviews, disputes can arise with the taxing authorities over the
interpretation or application of certain rules to the Group’s business conducted within the country involved. If the Group is unable to resolve any of these
matters favourably, there may be an adverse impact on the Group’s financial performance, cash flows or results of operations. This may also be the case for
any legal claims that the Group is required to defend. In the event that management’s estimate of the future resolution of these matters changes, the
Group will recognise the effects of the changes in its consolidated financial statements in the period that such changes occur.
There are no contingencies as at 31 December 2020.
SDX Energy Plc / 2020 Annual Report & Accounts / 87
Financial Statements
Notes to the Consolidated Financial Statements
For the year ended 31 December 2020
22. Leases
The Group has entered into various fixed-term leases, mainly for properties and vehicles.
a) Amounts recognised in the balance sheet
The analysis of the lease liability at 31 December 2020 is as follows:
31 December 31 December
US$’000s 2020 2019
Current 461 506
Non-current 960 1,121
Total lease liabilities 1,421 1,627
The maturity analysis of the lease liability at 31 December 2020 is as follows:
31 December
US$’000s 2020
Less than one year 461
Between one and two years 388
Between two and three years 192
Between three and four years 202
Between four and five years 178
After five years -
Total lease liability 1,421
b) Amounts recognised in the statement of profit or loss
The right-of-use assets at 31 December 2020 amounted to US$1.4 million and the depreciation charge for the period ended 31 December 2020
amounted to US$0.6 million and is shown below by underlying class of asset:
Depreciation
charge
31 December year ended
2020 31 December
US$000s Carrying value 2020
Properties 1,277 502
Motor vehicles 123 119
Others - 15
1,400 636
Total
The lease liability at 31 December 2020 was US$1.4 million. The corresponding interest expense for the year ended 31 December 2020 amounts to
US$0.1 million. The portion of the lease payments recognised as a reduction of the lease liabilities and as a cash outflow from financing activities for
the year ended 31 December 2020 amounted to US$0.6 million.
23. Discontinued operations
During 2020, SDX Energy Plc entered into sale and purchase agreements for NW Gemsa, which was executed on 13 July 2020, and South Ramadan,
which was executed on 1 November 2020. The disposal of these assets has been accounted for in line with IFRS 5-Disposal of subsidiaries, businesses
and non-current assets. The effective date of the sale and purchase agreement for NW Gemsa was 1 April 2020 with discontinued operations reflecting
operations for the first quarter of 2020 and that of South Ramadan was 1 November 2020 with discontinued operations reflecting operations for the first
10 months of 2020.
The underlying entity that owns the interest in the NW Gemsa asset, SDX Energy Egypt (Jersey) Ltd., has been considered as a disposal group and
its operations qualified as discontinued operations for the year ended 31 December 2020. The purchaser, Gulf Energy, a private Egyptian oil and gas
company, paid US$3.0 million in consideration for the Company’s interest, of which US$1.4 million was used to discharge the Company’s remaining
pre-effective date liabilities on the licence. The net gain on disposal of US$0.8 million represents the excess of the US$3.0 million proceeds over the
value of the remaining net assets of SDX Energy Egypt (Jersey) Ltd. at disposal date.
The South Ramadan asset was sold by its immediate holding entity, Sea Dragon Energy Holding Ltd., to the purchaser International Oil Services
(IOS)-LLC with effective date 1 November 2021. The purchaser, a private Egyptian company, paid US$0.5 million as consideration. A net gain on
disposal of US$0.5 million was realised.
88 / SDX Energy Plc / 2020 Annual Report & Accounts
The following table provides additional information on the profit/(loss) from discontinued operations for each asset as disclosed
in the Consolidated Income Statement:
Year ended 31 December
US$’000s 2020 2019
SDX Energy Egypt (Jersey) Ltd.
Revenue, net of royalties 3,263 18,412
Operating and administrative expenses (1,529) (15,235)
Income tax expense (626) (3,527)
Gain on disposal 790 -
Profit/(loss) from discontinued operations 1,898 (350)
Year ended 31 December
US$’000s 2020 2019
National Petroleum Company South Ramadan Ltd.
Revenue, net of royalties 327 -
Operating and administrative expenses (896) (46)
Income tax expense (61) -
Gain on disposal 500 -
Loss from discontinued operations (130) (46)
24. Related party transactions
All subsidiaries and joint arrangements (Brentford Oil Tools) are listed below. A list of the investments in subsidiary undertakings (all of whose operations
comprise one class of business, being oil and gas exploration, development and production), including the name, proportion of ownership interest,
country of operation and country of registration, is given below.
Percentage Country of Registered
Holding ownership operation address
Name
SDX Energy Holdings (UK) Limited Direct 100% U.K. 38, Welbeck street, London W1G 8DP, U.K.
SDX Energy Inc. Indirect 100% Canada 1900, 520-3rd Avenue SW, Centennial Place,
East Tower, Calgary, Alberta T2P 0R3
Sea Dragon Energy (UK) Limited Indirect 100% U.K. 38, Welbeck Street, London W1G 8DP, U.K.
SDX Energy Investments (UK) Limited Indirect 100% U.K. 38, Welbeck Street, London W1G 8DP, U.K.
SDX Energy Morocco (UK) Limited Indirect 100% U.K. 38, Welbeck Street, London W1G 8DP, U.K.
Sea Dragon Cooperatieve U.A. Indirect 100% Netherlands 38, Welbeck Street, London W1G 8DP, U.K.
Sea Dragon Energy Holding B.V. Indirect 100% Netherlands 38, Welbeck Street, London W1G 8DP, U.K.
SDX Energy Egypt (Nile Delta) B.V. Indirect 100% Egypt 38, Welbeck Street, London W1G 8DP, U.K.
Sea Dragon Energy (GOS) B.V. Indirect 100% Egypt 38, Welbeck Street, London W1G 8DP, U.K.
Sea Dragon Energy (Nile) B.V. Indirect 100% Egypt 38, Welbeck Street, London W1G 8DP, U.K.
Sea Dragon Energy (NW Gemsa) B.V. Indirect 100% Egypt 38, Welbeck Street, London W1G 8DP, U.K.
Sea Dragon Energy Holding Ltd. Indirect 100%British Virgin Islands Commerce House, Wickhams Cay 1,
P.O. Box 3140, Road Town, Tortola,
British Virgin Islands
NPC (Shukheir Marine) Ltd. Indirect 100% Egypt Commerce House, Wickhams Cay 1,
P.O. Box 3140, Road Town, Tortola,
British Virgin Islands
Madison International Oil and Gas Ltd. Indirect 100% Barbados Erin Court, Bishop’s Court Hill,
St. Michael, Barbados
Madison Egypt Oil and Gas Ltd. Indirect 100% Egypt Erin Court, Bishop’s Court Hill,
St. Michael, Barbados
Madison Cameroon Oil and Gas Ltd. Indirect 100% Cameroon Erin Court, Bishop’s Court Hill,
St. Michael, Barbados
SDX Energy Egypt (Meseda) Ltd. Indirect 100% Egypt 10, Road 261, New Maadi, Cairo, Egypt
SDX Energy Morocco (Jersey) Limited Indirect 100% Morocco P.O. Box 771, Ground Floor, Colomberie Close,
St.Helier, Jersey
Limerick Services SARL Indirect 100% Morocco 2 Rue Ghazaoua la pinède Souissi, Rabat, Morocco
Brentford Oil Tools Indirect 50% Egypt 7 Nazeh Khalifa st., El Korba, Misr El Gadiga,
Cairo, Egypt
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SDX Energy Plc / 2020 Annual Report & Accounts / 89
Financial Statements
Notes to the Consolidated Financial Statements
For the year ended 31 December 2020
25. Compensation of key management personnel
The remuneration of directors and other key management personnel during the years ended 31 December 2020 and 2019 was as follows:
Year ended 31 December
US$’000s 2020 2019
Salaries, incentives and short term benefits 611 1,253
Directors’ fees 309 199
Stock based compensation 114 400
Total compensation 1,034 1,852
Key management personnel have been identified as the non-executive directors and executive officers of the Company. The executive officers include
the CEO and CFO.
In the year ended 31 December 2019, termination benefits of US$0.6 million (2020: nil) were paid to Paul Welch, the previous Chief Executive Officer.
26. Subsequent events
On 5 February 2021, the Company announced that it had been awarded a 10-year extension to its West Gharib Production Services Agreement in Egypt
until 9 November 2031.
The key terms of the extension, in which SDX has a 50% working interest, are as follows:
• A commitment, irrespective of Brent price, to drill six development wells by 31 December 2022 and one water injection well;
• If Brent reaches US$55 for twelve consecutive months during the extension period, four further development wells will be drilled during
the extension period;
• If Brent reaches US$60 for twelve consecutive months during the extension period, two further development wells will be drilled during
the extension period;
• Payment of a deferred signature bonus of US$2.0 million (SDX share US$1.0 million). US$1.0 million of this deferred bonus will be paid in monthly
installments in the next 12 months and the remaining US$1.0 million will be paid in two installments of US$0.5 million each, on 31 December 2022
and 31 December 2023; and
• A further contingent bonus of up to US$2.0 million (SDX share US$1.0 million) would be payable if Brent reaches the following price points;
- US$75 for a period of six months-a further US$0.5 million is payable
- US$80 for a period of six months-a further US$0.5 million is payable
- US$85 for a period of six months-a further US$1.0 million is payable
90 / SDX Energy Plc / 2020 Annual Report & Accounts
Financial Statements
Page title
Company
Financial Statements
Parent Company Balance Sheet 92
Parent Company Statement of Changes in Equity 93
Notes to the Parent Company Financial Statements 94
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SDX Energy Plc / 2020 Annual Report & Accounts / 91
Financial Statements
Parent Company Balance Sheet
As at 31 December 2020
As at As at
31 December 31 December
£’000s Note 2020 2019
Fixed assets
Investments 6 40,945 40,945
40,945 40,945
Current assets
Cash at bank and in hand 22 29
Debtors: amounts falling due within one year 7 296 75
Amounts owed by group undertakings 8 2,271 169
2,589 273
Current liabilities
Creditors: amounts falling due within one year 9 (438) (279)
Amounts owed to group undertakings 10 (5,053) (2,133)
(5,491) (2,412)
Net current liabilities (2,902) (2,139)
Net assets 38,043 38,806
Capital and reserves
Called-up share capital 11 2,104 2,097
Share premium account 101 -
Share-based payment reserve 651 451
Retained earnings 35,187 36,258
Total shareholders’ funds 38,043 38,806
As a consolidated income statement is presented in this Annual Report, a separate income statement for the Company is not presented within
these financial statements as permitted by Section 408 of the Companies Act 2006. The Company reported a loss for the year of £1.1 million
(2019: £2.6 million).
The financial statements on pages 92 to 100 of SDX Energy Plc registered number 11894102 were approved by the Board of Directors on 19 March 2021
and signed on their behalf by:
Signed on behalf of the Board of Directors
Director
Mark Reid
92 / SDX Energy Plc / 2020 Annual Report & Accounts
Financial Statements
Parent Company Statement of Changes in Equity
For the year ended 31 December 2020
Year Nine
ended months ended
31 December 31 December
£’000s Note 2020 2019
Share capital
Balance, beginning of period 2,097 -
Issuance of common shares 11 7 50
Share-for-share exchange 11 - 40,944
Capital reduction 11 - (38,897)
Balance, end of period 2,104 2,097
Share premium
Balance, beginning of period - -
Issuance of common shares 11 101 -
Balance, end of period 101 -
Share-based payment reserve
Balance, beginning of period 451 -
Share-based compensation for the period 200 451
Balance, end of period 651 451
Retained earnings
Balance, beginning of period 36,258 -
Capital reduction 11 - 38,897
Total comprehensive loss for the period (1,071) (2,639)
Balance, end of period 35,187 36,258
Total equity 38,043 38,806
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SDX Energy Plc / 2020 Annual Report & Accounts / 93
Financial Statements
Notes to the Parent Company Financial Statements
1. Accounting policies
Basis of preparation
The Parent Company financial statements of SDX Energy Plc (the Company) have been prepared in accordance with FRS 102 as they apply to the
Company for the year ended 31 December 2020, and with the Companies Act 2006. The financial statements were approved by the Board and authorised
for issue on 19 March 2021. SDX Energy Plc is a public limited company limited by shares incorporated, registered in the United Kingdom and is listed on
the Alternative Investment Market (AIM). The company’s registered address is 38 Welbeck Street, London, United Kingdom, W1G 8DP.
The Company was incorporated on 20 March 2019 with a year end of 31 December in order to act as the ultimate holding company of its subsidiaries.
The Company’s financial statements are presented in UK pound sterling and all values are rounded to the nearest thousand (£000) except when
otherwise indicated.
As a Consolidated income statement is published in this Annual Report, a separate income statement for the Company is not presented within
these financial statements as permitted by Section 408 of the Companies Act 2006. The Company reported a loss for the year of £1.1 million
(2019: £2.6 million).
The Company meets the definition of a qualifying entity under FRS 102 and has therefore taken advantage of the disclosure exemptions available
to it in respect of its separate financial statements, which are presented alongside the consolidated financial statements. Exemptions have been taken
in relation to share-based payments, financial instruments, presentation of a cash flow statement and remuneration of key management personnel.
The principal accounting policies adopted in the preparation of the financial statements are set out below. The policies have been consistently applied
throughout the period, unless otherwise stated.
Basis of measurement
The financial statements have been prepared on a historical cost basis.
Going concern
The financial statements have been prepared using the going concern basis of accounting. Although the Company is in a net current liability position,
the Directors have a reasonable expectation that the Company has adequate resources and the ability to receive loans from its subsidiaries or defer
payment of its amounts owed to group companies in order to settle its debts as they become due.
The Company directors have reviewed the Company and its subsidiaries forecasted cash flows for the next 12 months from the date of approval of these
Financial Statements. The directors have considered the impact on the forecasted cash flows of the volatile oil price environment and potential impact
on demand resulting from the COVID-19 virus. In addition, the directors have considered the counterparty credit risk as a result of the COVID-19 virus.
The directors have performed sensitivities on these forecasted cash flows and considered that the Company subsidiaries’ underlying long-term fixed-price
contracts in Gharb Basin gas fields in Morocco and South Disouq in Egypt mitigated the potential risk on going concern of the Company.
Therefore, after making appropriate enquiries and considering the risks described above, the Directors have a reasonable expectation that the Company
has adequate resources to continue in existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in the
preparation of the financial statements.
2. Critical accounting judgements and key sources of estimation uncertainty
The key assumption concerning the future and other key sources of estimation uncertainty at the balance sheet date that has a significant risk of causing
a material adjustment to the carrying amounts of assets and liabilities is the recoverable value of investment in subsidiaries. The Company evaluates
investments in subsidiaries for indicators of impairment if required. Any impairment test, where required, involves estimates and associated assumptions
related to several factors. Refer to the accounting policy as described in note 3.
94 / SDX Energy Plc / 2020 Annual Report & Accounts
3. Significant accounting policies:
Foreign currency
The functional currency is the currency of the primary economic environment in which that entity operates. Transactions denominated in other currencies
are converted into the functional currency at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign
currencies are retranslated at year-end exchange rates.
The Group’s financial statements are presented in UK pound sterling, as that presentation currency most reliably reflects the business performance
of the entity.
Foreign currency translation:
Transactions in foreign currencies are translated to the functional currency using the exchange rates at the dates of the transactions. Monetary assets
and liabilities denominated in foreign currencies are translated to GBP at the period end exchange rate.
Financial instruments:
Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the instrument.
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument
is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities.
Financial assets and liabilities
All financial assets and liabilities are initially measured at transaction price (including transaction costs), except for those financial assets classified as at
fair value through profit or loss, which are initially measured at fair value (which is normally the transaction price excluding transaction costs), unless the
arrangement constitutes a financing transaction. If an arrangement constitutes a financing transaction, the financial asset or financial liability is measured
at the present value of the future payments discounted at a market rate of interest for a similar debt instrument.
Financial assets and liabilities are only offset in the statement of financial position when, and only when there exists a legally enforceable right to set off
the recognised amounts and the Group intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Debt instruments which meet the following conditions of being “basic” financial instruments as defined in paragraph 11.9 of FRS 102 are subsequently
measured at amortised cost using the effective interest method.
Debt instruments that have no stated interest rate (and do not constitute financing transaction) and are classified as payable or receivable within one
year are initially measured at an undiscounted amount of the cash or other consideration expected to be paid or received, net of impairment.
Financial assets are derecognised when and only when a) the contractual rights to the cash flows from the financial asset expire or are settled, b) the
Group transfers to another party substantially all of the risks and rewards of ownership of the financial asset, or c) the Group, despite having retained
some, but not all, significant risks and rewards of ownership, has transferred control of the asset to another party.
Financial liabilities are derecognised only when the obligation specified in the contract is discharged, cancelled or expires.
Investments
Investments in non-derivative instruments that are equity of the issuer (where shares are publicly traded or their fair value is reliably measurable)
are measured at fair value through profit or loss. Where fair value cannot be measured reliably, investments are measured at cost less impairment.
In the Company balance sheet, investments in subsidiaries and associates are measured at cost less impairment. For investments in subsidiaries acquired
for consideration including the issue of shares qualifying for merger relief, cost is measured by reference to the nominal value of the shares issued plus fair
value of other consideration. Any premium is ignored.
Impairment of assets
Assets, other than those measured at fair value, are assessed for indicators of impairment at each balance sheet date. If there is objective evidence
of impairment, an impairment loss is recognised in profit or loss as described below.
Non-financial assets
An asset is impaired where there is objective evidence that, as a result of one or more events that occurred after initial recognition, the estimated
recoverable value of the asset has been reduced. The recoverable amount of an asset is the higher of its fair value less costs to sell and its value in use.
The recoverable amount of goodwill is derived from measurement of the present value of the future cash flows of the cash-generating units of which the
goodwill is a part. Any impairment loss in respect of a CGU is allocated first to the goodwill attached to that CGU, and then to other assets within that
CGU on a pro-rata basis.
Where indicators exist for a decrease in impairment loss previously recognised for assets other than goodwill, the prior impairment loss is tested to
determine reversal. An impairment loss is reversed on an individual impaired asset to the extent that the revised recoverable value does not lead to a
revised carrying amount higher than the carrying value had no impairment been recognised. Where a reversal of impairment occurs in respect of a CGU,
the reversal is applied first to the assets of the CGU, except for goodwill, on a pro-rata basis. Impairment of goodwill is never reversed.
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SDX Energy Plc / 2020 Annual Report & Accounts / 95
Financial Statements
Notes to the Parent Company Financial Statements
continued
3. Significant accounting policies: (continued)
Financial assets
For financial assets carried at amortised cost, the amount of an impairment is the difference between the asset’s carrying amount and the present value
of estimated future cash flows, discounted at the financial asset’s original effective interest rate.
For financial assets carried at cost less impairment, the impairment loss is the difference between the asset’s carrying amount and the best estimate
of the amount that would be received for the asset if it were to be sold at the reporting date.
Where indicators exist for a decrease in impairment loss, and the decrease can be related objectively to an event occurring after the impairment was
recognised, the prior impairment loss is tested to determine reversal. An impairment loss is reversed on an individual impaired financial asset to the extent
that the revised recoverable value does not lead to a revised carrying amount higher than the carrying value had no impairment been recognised.
Cash at bank and in hand:
Cash and cash equivalents comprise cash in hand and deposits held at call with banks.
Creditors:
Creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business. Accounts payable are classified as current
liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current
liabilities.
Creditors are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method.
Current and deferred corporation tax:
The tax expense for the period comprises current and deferred tax. Income tax expense is recognised in the Statement of Comprehensive Income except
to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the period, using tax rates enacted or substantively enacted at the reporting date.
Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised on the initial recognition of assets or liabilities
in a transaction that is not a business combination. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences
when they reverse, based on the laws that have been enacted or substantively enacted at the reporting date. Deferred tax assets and liabilities are offset
if there is a legally enforceable right to offset, and they relate to income taxes levied by the same tax authority.
Deferred income tax liabilities are provided on taxable temporary differences arising from investments in subsidiaries, associates and joint arrangements,
except for deferred income tax liability where the timing of the reversal of the temporary difference is controlled by the company and it is probable that
the temporary difference will not reverse in the foreseeable future.
A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the temporary difference
can be utilised.
Share-based payments
The grant date fair value of options granted to employees is recognised as stock-based compensation expense, with a corresponding increase in
contributed surplus over the vesting period. Each tranche granted is considered a separate grant with its own vesting period and grant date fair value.
A forfeiture rate is estimated on the grant date and is adjusted to reflect the actual number of options that vest.
96 / SDX Energy Plc / 2020 Annual Report & Accounts
4. Financial risk management:
Overview:
The company’s activities expose it to a variety of financial risks that arise as a result of its operations and financing activities such as credit risk and
liquidity risk. This note presents information about the company’s exposure to each of the above risks, the company’s objectives, policies and processes
for measuring and managing risk, and the company’s management of capital. Further quantitative disclosures are included throughout these financial
statements.
The Board of Directors oversees management’s establishment and execution of the company’s risk management framework. Management has
implemented and monitors compliance with risk management policies. The company’s risk management policies are established to identify and analyse
the risks faced by the company, to set appropriate risk limits and controls, and to monitor risks and adherence to market conditions and the company’s
activities.
Credit risk:
Credit risk is the risk of financial loss to the company if a customer or counterparty to a financial instrument fails to meet its contractual obligations,
and arises principally from the company’s receivables and cash held with banks.
Cash at bank and in hand:
The company limits its exposure to credit risk by only investing in liquid securities and only with highly rated counterparties. The company’s cash at bank
is currently held by banks with AA or equivalent credit ratings or better. Given these credit ratings, management does not expect any counterparty to fail
to meet its obligations.
Liquidity risk:
Liquidity risk is the risk that the company will not be able to meet its financial obligations as they fall due. The company’s approach to managing liquidity
is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions,
without incurring unacceptable losses or risking damage to the company’s reputation.
Typically, the company ensures that it has sufficient cash on demand to meet expected operational expenses, including the servicing of financial
obligations; this excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters and political unrest.
To achieve this objective, the company prepares annual capital expenditure budgets, which are regularly monitored and updated as considered necessary.
Further, the company utilises authorisations for expenditures on projects to further manage capital expenditure and has a Board of Director approved
signing authority matrix.
As at 31 December 2020 the company’s financial liabilities are due within one year.
Capital management:
The company’s objective when managing its capital is to ensure it has sufficient capital to maintain its ongoing operations.
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5. Compensation of key management personnel
The remuneration of directors and other key management personnel was as follows:
Year Nine
ended months ended
31 December 31 December
£’000s
2020 2019
Salaries, incentives and short term benefits 471 277
Directors’ fees 241 118
Stock based compensation 90 313
Total compensation 802 708
Key management personnel have been identified as the non-executive directors and executive officers of the Company. The executive officers include
the CEO and CFO.
SDX Energy Plc / 2020 Annual Report & Accounts / 97
Financial Statements
Notes to the Parent Company Financial Statements
continued
Investments
6.
The parent Company has investments in the following subsidiary undertakings and other significant investments.
Percentage Country of Registered
Name
Holding ownership operation address
SDX Energy Holdings (UK) Limited Direct 100% U.K. 38, Welbeck street, London W1G 8DP, U.K.
SDX Energy Inc. Indirect 100% Canada 1900, 520-3rd Avenue SW, Centennial Place,
East Tower, Calgary, Alberta T2P 0R3
Sea Dragon Energy (UK) Limited Indirect 100% U.K. 38, Welbeck Street, London W1G 8DP, U.K.
SDX Energy Investments (UK) Limited Indirect 100% U.K. 38, Welbeck Street, London W1G 8DP, U.K.
SDX Energy Morocco (UK) Limited Indirect 100% U.K. 38, Welbeck Street, London W1G 8DP, U.K.
Sea Dragon Cooperatieve U.A. Indirect 100% Netherlands 38, Welbeck Street, London W1G 8DP, U.K.
Sea Dragon Energy Holding B.V. Indirect 100% Netherlands 38, Welbeck Street, London W1G 8DP, U.K.
SDX Energy Egypt (Nile Delta) B.V. Indirect 100% Egypt 38, Welbeck Street, London W1G 8DP, U.K.
Sea Dragon Energy (GOS) B.V. Indirect 100% Egypt 38, Welbeck Street, London W1G 8DP, U.K.
Sea Dragon Energy (Nile) B.V. Indirect 100% Egypt 38, Welbeck Street, London W1G 8DP, U.K.
Sea Dragon Energy (NW Gemsa) B.V. Indirect 100% Egypt 38, Welbeck Street, London W1G 8DP, U.K.
Sea Dragon Energy Holding Ltd. Indirect 100%British Virgin Islands Commerce House, Wickhams Cay 1,
P.O. Box 3140, Road Town, Tortola,
British Virgin Islands
NPC (Shukheir Marine) Ltd. Indirect 100% Egypt Commerce House, Wickhams Cay 1,
P.O. Box 3140, Road Town, Tortola,
British Virgin Islands
Madison International Oil and Gas Ltd. Indirect 100% Barbados Erin Court, Bishop’s Court Hill,
St. Michael, Barbados
Madison Egypt Oil and Gas Ltd. Indirect 100% Egypt Erin Court, Bishop’s Court Hill,
St. Michael, Barbados
Madison Cameroon Oil and Gas Ltd. Indirect 100% Cameroon Erin Court, Bishop’s Court Hill,
St. Michael, Barbados
SDX Energy Egypt (Meseda) Ltd. Indirect 100% Egypt 10, Road 261, New Maadi, Cairo, Egypt
SDX Energy Morocco (Jersey) Limited Indirect 100% Morocco P.O. Box 771, Ground Floor, Colomberie Close,
St.Helier, Jersey
Limerick Services SARL Indirect 100% Morocco 2 Rue Ghazaoua la pinède Souissi, Rabat, Morocco
Brentford Oil Tools Indirect 50% Egypt 7 Nazeh Khalifa st., El Korba, Misr El Gadiga,
Cairo, Egypt
7. Debtors: amounts falling due within one year
31 December 31 December
£’000s
2020 2019
Prepayments 99 46
Other debtors 197 29
296 75
Total
98 / SDX Energy Plc / 2020 Annual Report & Accounts
8. Amounts owed by group companies undertakings
31 December 31 December
£’000s
2020 2019
Sea Dragon Energy (Nile) B.V. 562 -
Sea Dragon Energy (NW Gemsa) B.V. 67 -
SDX Energy Egypt (Meseda) Ltd. 696 -
Sea Dragon Energy Holding B.V. 38 -
SDX Energy Morocco (Jersey) Limited 883 154
Madison Egypt Oil and Gas Ltd. 8 5
Madison International Oil and Gas Limited 8 5
Madison Cameroon Oil and Gas Ltd. 9 5
2,271 169
Total
Current accounts due from group companies are non-interest bearing and repayable on demand.
9. Creditors
31 December 31 December
£’000s
2020 2019
Trade creditors 200 204
Other creditors 238 75
438 279
Total
10. Amounts owed to group companies
31 December 31 December
£’000s
2020 2019
Sea Dragon Energy (Nile) B.V. - 148
Sea Dragon Energy (UK) Limited 4,868 1,872
SDX Energy Inc. 185 113
5,053 2,133
Total
Current accounts due to group companies are non-interest bearing and repayable on demand.
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11. Called-up share capital
2020 2019
£’000 £’000
Authorised, issued and fully paid ordinary shares of £0.01 each 2,104 2,097
During September 2020, the Company issued a total of 655,028 ordinary shares of £0.01 to its Executive Directors and certain other employees as part
of the bonus awarded for 2019 performance. These shares were issued at a price of £0.1647 per share, representing the 60-day volume weighted average
price of a share on 25 September 2020. £0.007 million was posted to the share capital during the year, with the remainder recognised as share premium.
12. Related parties
The company in the ordinary course of business, entered into certain related party transactions.
31 December 31 December
2020 2019
SDX Energy Inc. (185) (113)
Sea Dragon Energy (Nile) B.V. 562 (148)
Sea Dragon Energy (UK) Limited (4,868) (1,872)
SDX Energy Morocco (Jersey) Limited 883 154
Sea Dragon Energy (NW Gemsa) B.V. 67 -
SDX Energy Egypt (Meseda) Ltd. 696 -
Sea Dragon Energy Holding B.V. 38 -
Madison Cameroon Oil and Gas Limited 9 5
Madison International Oil and Gas Limited 8 5
Madison Egypt Oil & Gas Ltd. 8 5
The balances with related parties are presented in notes 8 and 10.
SDX Energy Plc / 2020 Annual Report & Accounts / 99
Financial Statements
Notes to the Parent Company Financial Statements
continued
13. Financial instruments and risk management
Capital risk management
The capital structure of the company consists of debt, which includes the Amounts owed to group companies disclosed in note and equity attributable
to equity holders of the parent and related parties, comprising issued capital and an accumulated loss as disclosed in the statement of changes in equity.
Significant accounting policies
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on
which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in note 3
to the financial statements.
Categories of financial instruments
31 December 31 December
2020 2019
£’000s
Financial assets
Cash and trade and other receivables 318 104
Amounts due by group undertakings 2,271 169
2,589 273
Total
31 December 31 December
2020 2019
£’000s
Financial liabilites
Creditors 438 279
Amounts due to group undertakings 5,053 2,133
5,491 2,412
Total
Financial risk management objectives
The company seeks to minimise the effects of fair value interest rate risk and price risk through active management processes. The company does
not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes.
100 / SDX Energy Plc / 2020 Annual Report & Accounts
Corporate Information
Executive Directors
Mark Reid
Chief Executive Officer
Nicholas Box
Chief Financial Officer
Non-Executive Directors
Michael Doyle
Non-Executive Chairman
Timothy Linacre
David Mitchell
Amr Al Menhali
Catherine Stalker
Stock Exchange Listing
London Stock Exchange AIM
Symbol: SDX
Registrar (United Kingdom)
Link Asset Services
The Registry, 34 Beckenham Road
Beckenham, Kent BR3 4TU
United Kingdom
T: +44 (0)871 664 0300
Nominated Advisor and Joint Broker
Stifel Nicolaus Europe Limited
Callum Stewart/Jason Grossman/
Ashton Clanfield
150 Cheapside, London, EC2V 6ET,
United Kingdom
Tel: +44 (0) 20 7710 7600
Joint Brokers
Peel Hunt LLP
Richard Crichton/David McKeown
Moor House, 120 London Wall
London, EC2Y 5ET
United Kingdom
Tel: +44 (0) 207 418 8900
Independent Engineers
Gaffney, Cline & Associates
Bentley Hall, Blacknest, Alton,
Hampshire, GU34 4PU,
United Kingdom
Tel: +44 (0) 1420 525366
Auditors
PricewaterhouseCoopers LLP
431 Union Street, Aberdeen, AB11 6DA
United Kingdom
Tel: +44 (0)1224 210100
Public Relations
Camarco
107 Cheapside
London, EC2V 6DN
United Kingdom
Tel: +44 (0) 203 757 4980
SDX Energy Office Locations
United Kingdom
Registered address and head office
38 Welbeck Street, London W1G 8DP
United Kingdom
T: +44 (0)20 3219 5640
F: +44 (0)20 3219 5655
Egypt
Road 261, No. 10,
New Maadi, Cairo, Egypt
T: +20 2 2517 6528
F: +20 2 2517 6524
Morocco
Forum 6, Rue Ibrahim Tadili
Bureau n 7-1er Etage
Souissi-Rabat, Kingdom of Morocco
T: +212 537 635 656
F: +212 537 656 314
SDX Energy Plc / 2020 Annual Report & Accounts / 101
www.sdxenergy.com