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Senex Energy (ASX:SXY) - CEO, Ian Davies
CEO, Ian Davies
Source: Macquarie Group
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  • Senex Energy (SXY) has experienced strong production growth for the March 2020 quarter
  • Total quarterly production was up 31 per cent to 589 kilo barrels of oil equivalent
  • Gas and gas liquids volumes from the Surat Basin and the Gemba field of the Cooper Basin increased by 68 per cent
  • Senex achieved over $33 million in sales revenue — a 13 per cent increase on the previous quarter
  • Despite the Australian dollar oil price dropping by 44 per cent, Senex is protected by its fixed-price contracts and low-cost business model
  • The company has drilled 67 out of 85 wells within the Surat Basin but is strictly complying with COVID-19 regulations
  • Additionally, Senex has reiterated its production guidance of between 1.8 and 2 million barrels of oil equivalent for the 2020 financial year
  • Senex Energy is up 1.35 per cent with shares trading for 18.8 cents each

Senex Energy (SXY) has reported experiencing a strong production growth for the March 2020 quarter.

Total quarterly production was up 31 per cent to 589 kilo barrels of oil equivalent (kboe). Sales volumes of 539 kboe (before third party gas purchase volumes of 97 kboe) were 35 per cent higher than the December 2019 quarter.

While Senex experienced lower oil sales volumes due to natural field decline, this was offset by a 68 per cent increase in gas and gas liquids volumes from the Surat Basin and the Gemba field in the Cooper Basin.

The energy company achieved $33.3 million in sales revenue, which represents a 13 per cent increase on the previous quarter. This is attributed to a $23.2 million increase in gas revenue on higher gas production and strong prices, and lower Cooper Basin oil revenue of $10.2 million due to lower oil prices.

The average Australian dollar oil price was down 44 per cent from $111.9 per barrel (bbl) in the December 2019 quarter, to $63/bbl in the March quarter.

Despite the lower oil price environment, Senex says its diverse revenue streams, as well as its resilient, low-cost business model, positions it well to continue delivering material operating cashflow.

“Against the backdrop of COVID-19 and lower oil prices, Senex has delivered another outstanding quarter highlighted by strong gas production growth and delivery of key project milestones,” Managing Director and CEO Ian Davies said.

Its revenue is protected from oil price declines through fixed-price gas contracts at Atlas, an oil-linked gas sales agreement with downside price protection at Roma North, and a proactive oil hedging program.

At Atlas, over 60 per cent of expected gas production is contracted at strong fixed prices through to the end of 2022. At Roma North, the oil-linked gas sales agreement with GLNG is protected and delivers positive operating cashflow at below US$15/bbl and gas revenue of over A$5 per gigajoule at an oil price of
US$27/bbl and an AUD/USD exchange rate of 60 cents.

A total 95 per cent of Surat Basin gas production is contracted for 2020. In the Cooper Basin, 409,756 barrels of oil production are hedged for the 15-month period to June 30 2021 at average swap prices between A$90/bbl and A$95/bbl.

“Senex’s diversified revenue streams, low-cost business model and free cashflow breakeven below US$30/bbl mean we are in a strong financial position to not only complete our transformational Surat Basin gas projects, but to thrive in a lower oil price environment,” Ian added.

For the March 2020 quarter, Senex’s net capital expenditure totalled $41.5 million. This covered drilling, well completions and construction of gathering networks for the natural gas development projects in the Surat Basin.

As announced on March 11 2020, Senex reduced the originally planned 110 well Surat Basin drilling program to 85 wells to better align with initial production performance.

Senex has reviewed its Atlas capital program and identified an opportunity to build, own and operate Atlas water management infrastructure. This means Senex can reduce capital expenditure by roughly $15 million.

COVID-19

In response to the COVID-19 pandemic, Senex has put in place measures such as; strict travel restrictions, field access arrangements, hygiene discipline, social distancing at offices and worksites to mitigate the risk.

The company is continuing field operations and other programs while stile complying with Government and health regulations.

“Our highest priority is always the safety and wellbeing of our employees, contractors and the communities in which we operate,” Ian stated.

Production

In the Surat Basin, gas production of 358 kboe was 58 per cent higher than the previous quarter. Daily production exceeded 29 terajoules per day (TJ/day) and is progressing well towards 48 TJ/day.

At Roma North, quarterly production was up 24 per cent to 242 kboe as the plant reached nameplate capacity of 16 TJ/day. This was achieved more than 12 months ahead of schedule.

In early March, the company also entered FEED (Front End Engineering Design) on the low-cost 8 TJ/day expansion of the gas processing facility to 24 TJ/day. This is expected to be finalised by mid-2020.

The expansion project is a low-risk project with fast cash returns as long as it meets its expectations.

At Atlas, quarterly production was up 268 per cent to 116 kboe. Production from the first 23 wells continues to perform strongly and exceeded 10 TJ/day at the end of the quarter.

Senex is also sticking to its FY20 full-year production guidance of between 1.8 and 2 million barrels of oil equivalent (mmboe).

Senex Energy is up 1.35 per cent with shares trading for 18.8 cents each at 10:51 am AEST.

SXY by the numbers
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