As a shareholder of Senex Energy I am pleased to update you on the 2017 Full Year result and a presentation with Ian Davies CEO.
I acknowledge that the share price has frustratingly traded in a narrow band post falling heavily during the oil and gas global downturn in the 2012/2013 period.
Encouragingly, after meeting with Ian for over an hour, I feel considerable more comfortable with Senex and have a much better understanding of the enormous growth potential with its Surat Basin Gas Projects.
Currently Senex produces approx. 1million barrels of oil a year predominately from its Cooper Basin assets. Due to previous lower production and lower oil prices the Cooper Basin was offering a poor return. Due to much higher current oil prices and an increase in production the Cooper Basin is now profitable and will be an important asset in maintaining positive cash flow to help assist through the ramp up phase during the Surat Basins exploration and production. Management predicts that the Cooper Basin will continue to be a profitable asset however production will remain steady at approx. 1million barrels per year.
Ian clearly articulated that the enormous potential upside for the company is with the Western Surat Basin Gas Project. It has been the focus of the company over the last few years allowing them to raise $50m with a partnership with the US Oil and Gas specialist EIG in February this year. As a shareholder I would have recommended you to fully participate in the Share Purchase Plan at $0.315 cps. This raised an additional $36m. Importantly these funds raised has allowed the company to already commence phase 2. This has seen 11 wells already started drilling with the total 30 well program fully commenced by Christmas.
Management predicts that if successful with the initial 30 wells and then allowing additional production wells then the total production from the Surat Basin could produce up to and beyond 2 to 3million oil equivalent barrels a year. This is considerably higher than the current production. Ian believes that the company will not have to raise funds for this expansion as this will be achieved from cash flow and debt finance.
Positive new catalysts over the coming 6 to 12 months could include ongoing successful drilling, the gas plant being built by the company or processed by a third party and additional production from the cooper basin.
Adrian Prendergast, our oil and gas analyst, has retained his ADD recommendation but reduced his price target from $0.42 to $0.39. I have attached his latest research note for your interest.
I would be very comfortable accumulating shares around these current levels as I see potential upside with the encouraging Surat Basin Gas Projects.
ENDS
SXY Price at posting:
26.5¢ Sentiment: Buy Disclosure: Held
