SDX Energy Inc. (formerly Sea Dragon Energy Inc.) Announces the Closing of its Strategic Business Combination with Madison PetroGas Ltd. and its Name Change to SDX Energy Inc.

LONDON, Oct. 1, 2015 /CNW/ - SDX Energy Inc. (formerly Sea Dragon Energy Inc.) ("SDX") (TSX VENTURE: SDX) is pleased to announce that it has closed its previously announced strategic business combination (the "Transaction") with Madison PetroGas Ltd. ("Madison"), a private, arm's length, Canadian company (SDX and Madison, together, the "Parties").

Under the terms of the Transaction, SDX has acquired all of the issued and outstanding common shares of Madison on the basis of 0.477143 of a common share of SDX for each common share of Madison. In addition, prior to closing, in accordance with the terms of the Transaction, SDX effected a share consolidation of its common shares on a 35 to 1 basis (the "Consolidation") and changed its name to "SDX Energy Inc."

Pursuant to the Transaction, SDX issued 26,886,092 post-Consolidation common shares at a deemed price of $0.70 per share, for aggregate deemed consideration of approximately $18.82 million. As a result, upon completion of the Transaction, SDX has a total of 37,642,074 post-Consolidation common shares outstanding. In addition, in accordance with the terms of the Arrangement Agreement and the terms of the underlying warrant indenture, holders of warrants to purchase common shares of Madison now have the rights to purchase up to 610,743 common shares of SDX at an exercise price of C$1.68.

The new board of directors of SDX consists of four Madison nominees, Michael Doyle, David Mitchell, David Richards and Barrie Wright and two SDX nominees, Paul Welch and Paul Moase. It is expected that one additional independent nominee will be appointed at a later date. Paul Welch will remain as President and Chief Executive Officer and Olivier Serra will remain as Chief Financial Officer of the combined entity, which will be based in London, UK.

The Audit Committee of SDX consists of Paul Moase, David Richards and Barrie Wright.  All of the members of the Audit Committee are considered independent and financially literate.

SDX Energy Inc. post combination

SDX Energy is an Egypt focused E&P Company with low cost production assets in onshore Egypt combined with high impact exploration potential in Egypt and Cameroon.  The key highlights of SDX Energy are:

• A strong financial position with US$13 million of cash, no net debt and a solid cash flow profile at current rates of production and pricing
• Production of 1,630 boe/d (company working interest) with an estimated 2015 exit rate of 1,850 boe/d
• Low operating costs including an additional 40% reduction in G&A per barrel as result of combined synergies
• 2P reserves base of 5.1 MMboe from operated and non-operated assets in Egypt
• Diversified portfolio of assets consisting of two low cost producing concessions in Egypt and exploration assets in Egypt (P50 100 MMboe) and Cameroon (P50 108 MMboe) that contain transformation upside
• An active and fully funded work programme through to 2017 including three exploration wells
• Experienced Board and Management team well placed to capitalise on opportunities emerging from the improving operating environment in Egypt

New Website

SDX Energy will be launching a new corporate website which is anticipated to go live on 5 October 2015.  For further information on the Company, Shareholders and interested parties are encouraged to visit the new website at: www.SDXEnergy.com

Commenting on the completion of the merger, Paul Welch, CEO, said:

"We are delighted to have completed this transaction and relaunch the combined business as SDX Energy Inc.  The Company is materially stronger in terms of the asset base and balance sheet.  This merger creates a real platform for growth underpinned by low cost, resilient and profitable production, combined with exploration potential across our diverse portfolio of assets. We have an active and fully funded work programme in the next 12-18 months which will see three exploration wells drilled alongside a development programme focussed on increasing production. The newly comprised Board has a clearly defined strategy to grow the business in our core areas and is wholly focussed on creating value for its shareholders." 

About SDX

SDX is an international exploration, production and development company, headquartered in London, England, UK, with a principal focus on Egypt. In Egypt, SDX has an interest in two production concessions: NW Gemsa  and West Gharib both located in the Eastern desert. SDX's portfolio also consists of South Ramadan, a development asset in the Gulf of Suez; South Disouq, an exploration asset in the Nile Delta; and West Bakassi, an exploration block in Cameroon within the prolific Niger Delta Basin.

Advisory

Reserves Data 

The determination of oil and natural gas reserves involves the preparation of estimates that have an inherent degree of associated uncertainty. Categories of proved, probable and possible reserves have been established to reflect the level of these uncertainties and to provide an indication of the probability of recovery. The estimation and classification of reserves requires the application of professional judgment combined with geological and engineering knowledge to assess whether or not specific reserves classification criteria have been satisfied. Knowledge of concepts including uncertainty and risk, probability and statistics, and deterministic and probabilistic estimation methods is required to properly use and apply reserves definitions.

The recovery and reserve estimates of oil reserves provided herein are estimates only. Actual reserves may be greater than or less than the estimates provided herein.

Terms related to reserves classifications referred to herein are based on definitions and guidelines in the Canadian Oil and Gas Evaluation Handbook ("COGE Handbook") and are in accordance with National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities.

"Proved reserves" are those reserves that can be estimated with a high degree of certainty to be recoverable. It is likely that the actual remaining quantities recovered will exceed the estimated proved reserves.

"Probable reserves" are those additional reserves that are less certain to be recovered than proved reserves. It is equally likely that the actual remaining quantities recovered will be greater or less than the sum of the estimated proved plus probable reserves.

The qualitative certainty levels referred to in the definitions above are applicable to "individual reserves entities", which refers to the lowest level at which reserves calculations are performed, and to "reported reserves", which refers to the highest level sum of individual entity estimates for which reserves estimates are presented. Reported reserves should target the following levels of certainty under a specific set of economic conditions:

• at least a 90 percent probability that the quantities actually recovered will equal or exceed the estimated proved reserves. This category of reserves can also be denoted as 1P; and
• at least a 50 percent probability that the quantities actually recovered will equal or exceed the sum of the estimated proved plus probable reserves. This category of reserves can also be denoted as 2P.

Additional clarification of certainty levels associated with reserves estimates and the effect of aggregation is provided in the COGE Handbook. The estimates of reserves for individual properties may not reflect the same confidence level as estimates of reserves for all properties, due to the effects of aggregation.

Use of the term "boe" may be misleading, particularly if used in isolation. A "boe" conversion ratio of 6 Mcf: 1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Certain volumes provided in this news release represent a pro forma arithmetic sum of multiple estimates of proved plus probable reserves, which statistical principles indicate may be misleading as to volumes that may actually be recovered. Readers should give attention to the estimates of individual classes of reserves and appreciate the differing probabilities of recovery associated with each class as explained in the annual oil and gas disclosure filings of SDX (available on www.sedar.com) and the effects of arithmetic aggregation. Factors that could affect the accuracy of the reported pro forma aggregated reserves estimates include company level differences in evaluation effective dates, reservoir characteristics and pricing assumptions.

Reserves information in this press release are based on the independent reserves evaluation of Ryder Scott Company Canada dated February 19, 2015 of the crude oil, natural gas liquids and natural gas reserves of Sea Dragon Energy Inc. as at December 31, 2014 and the independent reserves evaluation of Sproule Associates Ltd. dated December 31, 2014 evaluating Madison's crude oil, natural gas liquids and natural gas reserves between October 2014 and January 2015.

Forward-Looking Statements

Certain statements contained in this press release constitute "forward-looking statements" as such term is used in applicable Canadian securities laws. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or are not statements of historical fact should be viewed as forward-looking statements. In particular, statements concerning the Parties, the Transaction, the anticipated synergies that will result from the Transaction and the key characteristics of the combined entity and should be viewed as forward-looking statements.

The forward-looking statements contained in this document are based on certain assumptions and although management considers these assumptions to be reasonable based on information currently available to them, undue reliance should not be placed on the forward-looking statements because SDX can give no assurances that they may prove to be correct. This includes, but is not limited to, assumptions related to, among other things: commodity prices and interest and foreign exchange rates; planned synergies, capital efficiencies and cost-savings; applicable tax laws; future production rates; the sufficiency of budgeted capital expenditures in carrying out planned activities; and the availability and cost of labour and services.

By their very nature, forward-looking statements are subject to certain risks and uncertainties (both general and specific) that could cause actual events or outcomes to differ materially from those anticipated or implied by such forward-looking statements. Such risks and other factors include, but are not limited to political, social and other risks inherent in daily operations for each of the Parties, risks associated with the industries in which the Parties operate in general, such as: operational risks; delays or changes in plans with respect to growth projects or capital expenditures; costs and expenses; health, safety and environmental risks; commodity price, interest rate and exchange rate fluctuations; environmental risks; competition; failure to realize the anticipated benefits of the Transaction and to successfully integrate the Parties; ability to access sufficient capital from internal and external sources; and changes in legislation, including but not limited to tax laws and environmental regulations. Readers are cautioned that the foregoing list of risk factors is not exhaustive and are advised to reference SDX's Annual Information Form for the year ended December 31, 2014 for a description of additional risks and uncertainties associated with SDX's business, including its exploration activities, which can be found on SDX's SEDAR profile at www.sedar.com.

The forward-looking statements contained in this press release are made as of the date hereof and SDX does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, except as required by applicable law. The forward-looking statements contained herein are expressly qualified by this cautionary statement.

THIS PRESS RELEASE SHOULD NOT BE CONSIDERED A COMPREHENSIVE SUMMARY OF THE TRANSACTION. ADDITIONAL INFORMATION IS AVAILABLE ON SDX'S SEDAR PROFILE.

INVESTORS ARE CAUTIONED THAT, EXCEPT AS DISCLOSED IN DOCUMENTS FILED BY SDX IN CONNECTION WITH THE TRANSACTION, ANY INFORMATION RELEASED OR RECEIVED WITH RESPECT TO THE TRANSACTION MAY NOT BE ACCURATE OR COMPLETE AND SHOULD NOT BE RELIED UPON.

NEITHER THE TSX VENTURE EXCHANGE NOR ITS REGULATION SERVICES PROVIDER (AS THAT TERM IS DEFINED IN THE POLICIES OF THE TSX VENTURE EXCHANGE) ACCEPTS RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THE RELEASE.

SOURCE SDX Energy Inc.

SDX Energy Inc., Paul Welch, President and Chief Executive Officer, Tel (London Head Office): [phone], Tel (Calgary): [phone]; Olivier Serra, Chief Financial Officer, Tel (London Head Office): [phone], Tel (Calgary): [phone]; Buchanan (PR), Ben Romney/Madeleine Seacombe, Tel: [phone]