research note. higher impact for aqo than sxy

RESEARCH NOTE: Senex Energy (SXY) - Snatcher-4 successful, now for Snatcher-5 in addition to 2 exploration wells with newly listed AQO

Research Note

Senex Energy (SXY)

Market Cap: A$824m

Recommendation: Buy

Share price: A$0.89

Price target: A$1.25

Subject: Snatcher-4 successful, now for Snatcher-5 in addition to 2 exploration wells with newly listed AQO

Key points:

SXY announced today that the Snatcher-4 oil appraisal well was successful following it intersecting a 10m gross oil column, with interpreted net oil pay of at least 6.5m. SXY has a 60% interest in PEL 111 while BPT holds the remaining 40%.

This well was the first of two appraisal wells at the Snatcher field and the rig will now move to the Snatcher-5 location.

SXY is also undertaking a two well program in PEL 516. This is a JV with newly listed Ambassador Oil and Gas (AQO) who is fully funding the wells to earn a 60% interest in the blocks.

The first well will be Shocking-1 with the rig mobilising on 4 June. Shocking-1 is adjacent to SXY's Vintage Crop-1 well which was successful, as well as the Caroowinnie and Narcoonowie oil fields which are operated by STO. The well has upside recoverable oil potential of 400,000 barrels if successful.

Following this well, the rig will move to drill the Kruger-1 exploration well which has recoverable oil potential of some 380,000 barrels if successful.

These wells are much higher impact for AQO than SXY given AQO's market cap of A$25m. AQO is headed up by ex Stuart Petroleum (who was taken over by SXY) CEO Tino Guglielmo.

We remain buyers of SXY now given the significant amount of catalysts coming up for the company on both the conventional and unconventional fronts and reiterate our A$1.25 target price.