Company Overview: Senex Energy Limited (Senex) is an oil and gas exploration and production company. The Company's segments include SURAT/BOWEN BASIN and COOPER/EROMANGA BASINS. The Company produces over one million barrels of oil annually from over 10 Senex-operated oil fields. The Company holds an acreage position across the South Australian and Queensland Cooper Basin, with approximately 15,000 square kilometers considered prospective for conventional and unconventional (tight) oil. The Company holds various interests, including the western flank of the Cooper Basin, as well as north, south and east of the Moomba processing and transportation hub. In the northern Cooper Basin, Senex is developing its Vanessa conventional gas field. Its Western Surat Gas Project is involved in the extraction of natural gas from coal seams over approximately 910 square kilometers of Senex permits, north of Roma in Queensland.
SXY Details
Senex Energy Ltd (ASX: SXY), has been lately seen to gain traction with drivers of value and growth being put in place with the development opportunities in the Cooper Basin, efforts on increasing production at the back of Western Surat Gas Project and the new Queensland land tenements, recently allocated Coal Seam Gas acreage in Queensland (via a significant funding deal) and group’s efforts for tendering for more land parcels.
Farm-out agreements at Cooper Basin: Senex, the operator in the PEL 93 Joint Venture, recently reported that their JV partner, Cooper Energy, has executed farm-out agreements to partially fund the Frey-1 exploration well being drilled at the PEL 93 in the Cooper Basin. The well is being partially funded by Dunns Earthmoving Pty Ltd and Metgasco Ltd under separate farm-in agreements which offer Dunns Earthmoving with entitlement to acquire a 15% equity in the license section defined as ‘Frey-1 Area and offer Metgasco Ltd a 20% equity in the Frey-1 Area in return for funding 30% of the cost of drilling Frey-1. More related assets in the Cooper Basin are currently under evaluation by Metgasco. Overall, Metgasco investment commitment is now estimated at less than $600,000. Coming to the Frey prospect, the well has the potential for stacked pay in multiple formations while the structure as mapped is a 4-way dip closed anticline evident on all stratigraphic levels. The closure is imaged via 2D seismic showing 30m of closure with an area of 9.5 km2 at the lowest closing contour. Frey-1 is a high risk/high return oil exploration objective, with a possibility to trigger a revival of exploration in the south-western Cooper Basin. The Frey-1 well was spudded on 23rd of September, and has a prognosed total depth of 1,502 meters which would take eleven days to finish. Further, Frey Prospect signifies a large undrilled structure in the South-western Cooper Basin. Frey-1 is designed to test the hydrocarbon potential of the top Namur Sandstone and Murta Formation interval in a four-way dip closed anticline evident at all stratigraphic levels.
Location of Frey-1, PEL 93 Cooper Basin (Source: Company Reports)
Drilling Highlights at Western Flank Oil Project:With regards to the group’s 60% interest in Western Flank Oil – ex PEL 104 / 111 project along with Beach, Martlet North-2 was drilled as a deviated oil appraisal well targeting a Namur Sandstone accumulation over 250 meters northeast of the producing Martlet North-1 well. The well was drilled from the Martlet North-1 pad and has an objective to improve overall field recovery. Martlet North-2 reached a total depth subsequent to month-end, with the decision made to plug and abandon due to lack of commercial pay. As per their Surat Basin’s Western Surat Gas Project, seven wells were drilled within the Eos and Glenora blocks during August with all wells cased and suspended as future coal seam gas producers. Fourteen wells out of the thirty wells in the current campaign, have been drilled with the 15th well spudded in early September. The Phase 2 investment program for the Western Surat Gas Project focuses on the south-east area of Senex permits, within the drill-ready blocks Eos (ATP 795) and Glenora (ATP 889). The area is over 30 kilometers from Roma and directly north of GLNG’s producing Roma field. The campaign is appraising the coal seam gas production potential of the Walloon coal measures with an average well depth of around 430 meters. Construction activities for water and gas handling infrastructure has been ongoing, with the gathering system approaching conclusion and wellsite skid installations underway.
Surat Basin Senex drilling activity for August 2017 (Source: Company Reports)
Controlling costs:The group’s production from base oil portfolio has been declining reaching 0.75 mmboe in fiscal year of 2017 as compared to 1.01 mmboe in the prior corresponding year. The production was under pressure on the back of falling capex since FY15. The group cut their capex to $62 million in fiscal year of 2017 and $28 million in FY16 from $82 million in FY15. Senex cost control from base oil portfolio led to A$27/bbl operating costs in the western flank. On the other hand, the group is aiming to enhance their production by controlling their unit operating costs. Moreover, they also hedged their oil sales until March 2018 guaranteeing a floor price of US$50/bbl, with full participation in oil prices above that level. The project is a high margin core business to the group enabling cash generation, which has a strong upside potential. The group is seeking high value oil opportunities on the western flank of the Cooper Basin and aiming for an Internal Rate of Return (IRR) of greater than 50% for all FY18 drilling targets.
FY17 western flank operating costs per barrel sold (before royalties) (Source: Company Reports)
Cooper Basin gas highlights on conventional and unconventional gas exploration: Cooper Basin’s project got PACE grant in March 2017 to bring the conventional Vanessa gas field online during fiscal year of 2018. The unconventional gas exploration project with Lattice Energy has multi-Tcf potential with the group carrying their share of expenditure under A$105 million work program, with over $50 million left to spend (as at 30 June 2017). The group is assessing commerciality in tight gas and basin centered gas play.
Surat Basin gas highlights: The group is bringing new gas supply to the market via their Western Surat Gas Project and new acreage, Project Atlas. This project is strategically located at around 2,000km2 to their current infrastructure and transmission facilities. Surat Basin reported a 2P reserves position of 438 PJ as at 30 June 2017, while expecting more 201 PJ of recoverable gas volumes. The project has a flexible 20-year gas sales agreement with GLNG at JCC oil-linked pricing and supports up to 425 wells over 20+ years. The group is aiming to achieve the lowest quartile operating and capital costs for the project. The project’s appraisal testing started in November 2016 (Phase 1) while phase 2 is a 30 well work program for 2017. EIG development funding of up to US$300 million is given for project acceleration. The group got 58km2 of coal seam gas acreage in September 2017 by the Queensland Government for Australian domestic gas supply. The first gas is expected for 2019 (approvals, land access and impact assessments are the initial focus) while the acreage is capable of sustaining plateau production of more than 30 TJ/day. The project has a strong demand as it got expressions of interest of more than 150 TJ/day of combined demand during the bid phase.
FY18 outlook:The group expects its focus on high value oil opportunities, growth projects and cost management to help Senex return to growth in FY18. For FY18, the cooper Basin production is said to be stable and growing, while Surat Basin is forecasting a ramp up throughout FY18 with major gas production target in FY19. Cooper Basin oil would focus on high-value drilling targets with seismic acquisition in the undeveloped south-west region (PELA 639). Overall production is forecasted to be in the range of 0.75 – 0.90 mmboe for FY18 as compared to 0.75 mmboe in prior corresponding year. The Cooper Basin’s FY18 capex is expected to be in the range of $30 to $40 million. Over $50 million of Lattice Energy committed funds would be spent on unconventional gas exploration project. Surat Basin capital expenditure is expected to be in the range of $45 million to $55 million for FY18. Remaining of Surat’s Phase 2 capital program would see expanded appraisal activities (including two pilots). Western Surat Gas Project sales gas infrastructure and next phase drilling program would be subject to more investment decisions during FY18. The group is expecting their total capex to be in the range of $80 to $100 million in FY18.
Production and Capex (Source: Company Reports)
Stock performance:The shares of Senex Energy surged over 14.8% in the last four weeks (as of September 26, 2017) and were up about 5% on September 27, 2017, given the recent developments and boost from commodity price. We believe the bullish momentum in the stock would continue in the coming months. The group’s diversified portfolio of conventional and unconventional assets coupled with their ability to convert opportunities in the structurally short east coast gas market, given their long operating experience, would drive the performance going forward. We give a “Buy” recommendation on the stock at the current price of 0.325.
SXY Daily Chart (Source: Thomson Reuters) Disclaimer The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.
AU
CA
NZ
UK
US
IND
.PNG)
.png)
.png)
.png)
.png)
Please wait processing your request...