Ann: Appendix 4D and Half Year Report, page-34

21 February 2020 Australia
EQUITIES
SXY AU Outperform
Price (at 01:13, 21 Feb 2020 GMT) A$0.35
Valuation A$ 0.54
- DCF (WACC 8.9%, beta 1.7, ERP 5.0%, RFR 2.3%)
12-month target A$ 0.50
12-month TSR % +42.9
Volatility Index High
GICS sector Energy
Market cap A$m 502
30-day avg turnover A$m 1.3
Number shares on issue m 1,435
Investment fundamentals
Year end 30 Jun 2019A 2020E 2021E 2022E
Revenue m 94.3 108.2 158.7 227.5
EBITDA m 46.2 52.2 95.3 144.1
EBIT m 8.1 5.0 36.7 86.2
Reported profit m 3.3 2.4 37.2 78.2
Adjusted profit m 7.2 4.2 37.2 78.2
Gross cashflow m 45.3 51.5 95.7 136.1
CFPS ¢ 3.1 3.5 6.6 9.3
CFPS growth % 75.1 13.4 85.9 42.1
PGCFPS x 11.2 9.9 5.3 3.7
PGCFPS rel x 0.92 0.86 0.52 0.41
EPS adj ¢ 0.5 0.3 2.6 5.4
EPS adj growth % 267.8 -41.4 779.6 110.1
PER adj x 70.6 120.5 13.7 6.5
PER rel x 3.31 5.99 0.82 0.46
Total DPS ¢ 0.0 0.0 0.0 0.0
Total div yield % 0.0 0.0 0.0 0.0
ROA % 1.7 0.8 4.6 10.4
ROE % 2.1 1.2 9.8 17.9
EV/EBITDA x 10.9 9.6 5.3 3.5
Net debt/equity % -6.4 18.5 21.2 -2.3
SXY AU rel Small Ordinaries performance, &
rec history
Note: Recommendation timeline - if not a continuous line, then there was no
Macquarie coverage at the time or there was an embargo period.
Source: FactSet, Macquarie Research, February 2020
(all figures in AUD unless noted)
Senex Energy (SXY AU)
Ramping up to 3mmboe by end-FY21
Key points
 1HFY20 earnings was weaker than expected. We have decreased earnings
by 10-25% on higher corporate costs and D&A from FY21 onward.
 40% volume growth is expected in 2HFY20, driven by increased volumes at
Roma North and Project Atlas, in order to achieve FY20 guidance.
 The 110 well program (57 completed) should drive SXY towards reaching its
18PJ/year production target by end FY21.
Event
• SXY reported its 1HFY20 results with weaker earnings offset by stronger free
cash flow.
Impact
• Earnings lower, free cash flow higher: SXY reported NPAT of A$1.5m
which was below our forecast. This was driven by higher than expected
operating costs, exploration expenses and employee expenses. We note
NPAT has shifted to a positive after SXY reported a loss in the prior half. Free
cash flow was stronger than forecast, and SXY reported a net cash position
(ex AASB16 leases) of A$7.4m. SXY ended the half with A$122.7m in cash
and A$115.3m of debt.
• Volume bump in 2H, continued rump up to FY21: FY20 production volume
of 1.8-2.0mmboe implies a ~40% increase in production in 2HFY20 (SXY
produced ~0.78mmboe in 1HFY20). Surat Basin guidance is 6.0-6.5 PJ and
Cooper Basin is 0.8-0.9mmboe. SXY has stated that gas production in the
Surat could ramp up to 18PJ/year, which is equivalent to 3.0mmboe, by end of
FY21 (16TJ/d at Roma North and 32TJ/d at Atlas).
• Surat Basin gas largely contracted for CY20: SXY has stated that 95% of
its CY20 gas and 62% of its CY21 gas is contracted, providing some level of
pricing security.
Earnings and target price revision
• Incorporating the 1HFY20 result, which was weaker than our forecasts, and
increasing corporate costs and D&A has seen our EPS forecast for FY20
decrease by 80%, FY21 by 26% and FY22 by 9%. We note that while the
percentage changes are large, the absolute dollar change is relatively small.
Our target price decreases by 9% to A$0.50 on the trimmed earnings profile.
Price catalyst
• 12-month price target: A$0.50 based on a DCF methodology.
• Catalyst: Updates on the ramp-up of Roma North and Project Atlas.
Action and recommendation
• Maintain Outperform: A miss in NPAT was offset by stronger cash flow.
Following initial production at Project Atlas in the half, the company is ramping
up production with 40% volume growth in 2HFY20 expected. The extensive
drilling campaign is expected to be completed by mid-2020 which should
enable SXY to achieve its targeted 18PJ/year initial production plateau by

from maquarie