SXY (ASX) Ann: Senex and GLNG amend WSGP gas sales arrangements

Originally posted by tt2000 ↑

Hi @rollacoaster,

Yes the 16TJ are on the same terms as before - it's not this that I have an issue with.

My issues /risks:

1. The volumes above the initial 16TJ appear to not be commercial based on the terms of the original deal - hence the split. Yes the new price will be higher (Which GLNG will have the last right to equal or better). But ultimately 34TJ now requires a higher price than originally anticipated.

2. The 34TJ is no longer referenced - in fact no volumes are.

3. (Not an issue - the other way you could look at this). Maybe SXY simply require longer to firm up the cost (and therefore price) at which the other blocks are commercial and aren't happy to to reach FID based on original price without further exploratory drilling.

Either way (even under #3) we have gone backwards and ID has caused this.

Expand

As much as my patience is tested, the following gives me some hope that we will start seeing a rocket ship launch eventually (when ID is able to deliver).

The following shows the EV/2p reserves for various companies in the sector.

It is not hard to see SXY has one of the lowest EV/2P reserve at 7.06 - but this table was as at May 2018, prior to SXY's reserve upgrades. Adjusting for this reserve upgrade (refer to table below) gives SXY an EV/2P reserve at between $4.50 (if Atlas achieves target recovery) to $5.38 / 2P reserve (as booked by SXY). This gives us the second lowest EV/ 2P reserve (apart from ELK - who appear to be having issues with one of their wells and are highly leveraged).

The second Excel table above shows the potential share price applying a 10x EV/2P reserve (based on recent acquisitions) at around potentially $0.80 to $0.95

The first table shows that producers receive a EV/2P ratio of 20.0x and above (i.e. STO and higher). If SXY can successfully monetise these assets, and we can command a 20.0x multiple, this equates to around $1.56 - $1.86.

This is why, despite my frustrations, I continue to believe that once we launch these projects, there should be a de-risking and an upward trending share price.

Hopefully, this recontracting was one of the final steps toward reaching FID, and financial close on the financing and then we start waiting for the drilling and monetisation to unfold.