London, UK, 3 July 2018

Edison issues outlook on SDX Energy (SDX)

In this note, we revisit SDX's 2017/2018 gas discoveries in Morocco and Egypt and look ahead at the company's plans to leverage this success to deepen its resource base. In 2019, drilling in Egypt will focus on several Ibn Yunus lookalikes with combined unrisked recoverable volume of c 70bcf and a 17bcf Abu Madi structural trap. In addition, SDX will target a 50mmbo unrisked oil prospect in 2019. In Morocco, SDX has a commendable 87% success rate of discovering gas at Sebou based on calibrated 3D seismic; 2019 targets include 20bcf of gross unrisked resource adding gas-behind-pipe in order to meet anticipated demand growth. Our updated valuation includes planned exploration, appraisal and development activity for 2019 and higher short-term oil price expectations, with valuation rising from 65.6p/share to 92.5p/share (+41%).

Our updated valuation reflects the movement of prospective resource to core value to reflect recent discoveries and the inclusion of SDX's 2019 drilling programme. Our RENAV rises from 65.6p/share to 92.5p/share (+41%) and core value from 58.3p/share to 79.8p/share (+36%).

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