SDX Energy has acknowledged it is in the early stages of making a bid for Circle Oil’s Moroccan and Egyptian assets. Egypt-focused SDX, in a statement on January 11, said it had signed a non-binding heads of terms on the deal.
“We have made clear our firm intentions to create shareholder value by growing SDX into a profitable mid-tier E&P company. Circle’s assets present an attractive opportunity to add material production and reserves at an attractive price. However, there is no certainty that this deal will be completed,” said SDX’s CEO, Paul Welch. For the acquisition to take shape, SDX said it would need to meet a number of conditions, including due diligence and regulatory compliance, as well as executing an equity fundraising.
SDX said it planned to move into the drilling phase at the South Disouq licence in early 2017. Furthermore, it is working on a well workover programme at North West Gemsa, in addition to a redevelopment, waterflood programme and facility capacity upgrade at Meseda.
Circle has warned that its debt load leaves no value for shareholders. The company is struggling with renegotiations and has received a number of waivers delaying repayments due under its reserve-based lending (RBL) facility, led by the International Finance Corp. (IFC).
Most recently, Circle said on December 29 that it had received a waiver to continue until January 26. Interest payments had been due on its debt in July and November 2016. The company went on to say the IFC and an unnamed member of its lending syndicate had agreed to provide stand-by financing to allow Circle’s strategic review to continue. The company has previously said interest in its assets had been expressed from a number of potential bidders, but disclosed nothing more.
Circle has two gas supply contracts in Morocco, with 5.99 mmcf (169,640 cubic metres) per day from the Sebou permit in the first half of 2016. Work programmes in the country require the drilling of two commitment wells on the Lalla Mimouna permit in 2017. During 2015, Circle’s net production in Egypt was 3,581 boepd. One of the problems that Circle has suffered from is irregular payments from Egypt, which has struggled in recent years to pay foreign companies for its energy supplies.