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2019 will be an active year for SDX with H119 focused on delivery of first gas at South Disouq, ahead of a return to the drill bit in H219. An eight to nine well programme targets both oil and gas prospectivity in Egypt and appraisal/development locations in Morocco. Drilling activity is expected to be financed through cash flow, undrawn debt ($10m accessible under a reserve-based facility) and an estimated end-FY18 cash position of $15.9m. We expect first gas from South Disouq and increased gas production in Morocco to provide cash flow to support a FY19 capital programme of an estimated US$38m. Our updated risked valuation stands at 99.6p/share (up from 92.7p/share, driven by FX and roll forward of NAV), but we drop our sales and cash flow forecasts for FY19 – a key driver being deferred gas sales in Morocco and a later start-up at South Disouq. Morocco and South Disouq combined make up 67% of our core valuation with contracted sale volumes not levered to the oil price.

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