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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 forecasted an increased annual production and earnings through its Surat Basin investments
  • The oil and gas explorer expects production to triple from FY19 to over 3.6 million barrels of oil equivalent in FY22
  • An annual EBITDA of between $100 and $110 million has been forecasted with a free cashflow of $70 to $90 million from FY22
  • While production and earnings are believed to increase, Senex expects nearly $15 million in capital savings due to its wells producing better than imagined
  • Senex credits this transformation to its strategy and the high-quality, low-cost nature of its oil and gas portfolio
  • Senex Energy is up 7.32 per cent and shares are trading for 22 cents each

Senex Energy (SXY) has announced its growth transformation strategy is expected to deliver an increased annual production and earnings through its Surat Basin investments.

The oil and gas explorer has forecasted production to triple from FY19 levels to more than 3.6 million barrels of oil equivalent (mmboe) in FY22, without increasing capital expenditure.

It also expects an annual EBITDA (earnings before interest, taxes, depreciation and amortisation) of between $100 and $110 million and free cashflow of between $70 and $90 million from FY22.

During Senex’s investor briefing, it re-affirmed its FY20 production guidance of between 1.8 to 2 mmboe, with an EBITDA guidance of between $40 and $50 million.

“The high-quality, low-cost nature of our Surat and Cooper Basin assets, together with our best-in-class execution capability, has enabled Senex to deliver a transformation in our business,” Senex Managing Director and CEO Ian Davies said.

Mr Davies credits the business transformation to a “robust” balance sheet, proactive hedging strategy and the company’s approach to gas contracting.

The resulting positive cashflows have supported the acceleration of its gas projects within the Surat Basin.

“Continued focus on free cashflow generation and enhancing shareholder value is evident in our Surat Basin development capital expenditure reductions,” Ian said.

At its Atlas project, within the Surat Basin, Senex has reviewed the initial production performance of the first 23 wells drilled and has chosen to reduce the number of wells required to reach initial plateau production from the originally planned 60 wells to 50.

Additionally, it has found an opportunity to build, own and operate critical Atlas water treatment infrastructure and remove ongoing water treatment tolls over the life of Atlas. This presents value to the company as it expects net capital expenditure for its Surat Basin capital program to reduce by around $15 million.

The Roma North area has continued its strong performance. It has now reached the plant’s initial capacity of 16 terajoules (TJ) a day, or roughly 6 petajoules (PJ) a year, more than 12 months ahead of schedule.

Senex has now completed its Roma North drilling campaign after completing 35 wells out of 50 originally planned.

Given the outperformance at Roma North, Senex has entered FEED (Front End Engineering Design) on the low-cost 8 TJ per day expansion of the gas processing facility to 24 TJ per day. This is expected to be finalised in by mid-2020.

“Careful progression through FEED demonstrates both Senex’s disciplined approach to capital investment and the low-risk high-return opportunities within our current portfolio,” Ian said.

Senex Energy is up 7.32 per cent and shares are trading for 22 cents each at 1:51 pm AEDT.

SXY by the numbers
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