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16.5¢ sundance energy australia limited

add to that the fact that if energy stocks in general come back...

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moremoneyplease

2,558 Posts.

181

02/01/20

15:20

Post #: 42196353
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Originally posted by cmonaussie: ↑

A New Year starts ... hopefully a good one for energy and for shareholders.

I see SNDE finished the year at ~ the same equivalent price that SEA.AX ($19.15 / $0.70155 / 100 = AUD$0.275) was the day before the redom (AUD$0.26). For round numbers I'll use SNDE = $20 and the y/e close (& MMP's of at least $21 within -10% (just))

One posted scenario is " 2020 base case 35$ bull case 55$ and if all things went swimmingly (but lets not get ahead of ourselves here 68$)" built on "... hopefully they come out with a plan of 17,500 boepd for 2020 ie 30% uplift on 2019"

And that is where there is divergence from what SNDE Mgmt has publicly stated which is (
"As laid out on our second-quarter call, while Sundance has not finalized our capital planning cycle for next year, we're contemplating two bookend scenarios." These 2 scenarios (discussed in their Q3 Conf Call) are

"... first and most aggressive we've run a program that looks a lot like this year from a development perspective. We can proceed for several years to develop within cash flow while delivering approximately 15% growth."

and

"maintenance case scenario, Sundance will drill 15 to 16 wells to keep production flat for 2020 and instead focus on retaining inventory in producing free cash flow over the course of the year which we could then use to pay down debt."

So those 2 scenarios should be the boundaries ... flat being base of 0% growth and bull being growth of 15% (or half the growth built into the price scenario for $35 Base and $50 Bull).

The message from SNDE is clear (the bolding is mine)
"The strength of our asset base and health of our balance sheet allow us the flexibility to select wherever on the spectrum between those two plans we believe will deliver the best results for our shareholders as prices in the overall economy fluctuate over time."

IMO, their needs to be some caution as 15% growth equals 15,410 boepd ("...Sundance's adjusted its full-year guidance slightly downward to 13,300 to 13,500 Boe a day...) from the midpoint of 13,400 boepd (whereas 30% gets you to 17,420 boepd)

That might begin to account for the significant differences in some of the targets.

At 17,500 boepd using noted EBITDAX was $180M (so $28.18 per Boe)
At 15,410 boepd I calc using above that EBITDAX = $158.5M

Substituting back in
"SEA in 2020 i say about 180 ebitdax x 4 less net debt = 370 = sp 55c"
becomes
$158.5 x 4 - $350 = US$284M = MC or about US$30 per SNDE share

The flat case of 13,400 boepd results in EBITDAX of $138M and at 4x multiple a $202M MC and SP of about $21

But then not all things are equal in that last calculation as the "Net Debt" number would be reduced by some amount (SNDE notes that flat requires 15-16 wells ... so $90M all in inc infrastructure) ... say $40M which raises MC to $242M and SP to about $25 roughly

So we have based on the SNDE "bookend scenarios"
Flat = $25 SP
15% Growth = $30 SP

Now here's the part I think y'all will like ... the above done on $28.18 of "margin". IMO that will increase due to SNDE mgmt signalling about 8% decline in costs. If the EBITDAX margin gets to
$29/Boe Margin (or better if SNDE remains "oily")
Flat = $27 SP
15% Growth = $32 SP
Neither number above includes the growing cash from increase in margin.

Call it 10% less on MMP's base case scenario for SNDE's 15% growth scenario primarily benefiting from margin expansion. That's $13 above y/e close and a 63% return from here. So quite a positive outcome for SNDE

If all my energy holdings went up by 63% this year I'd be happy.

Good luck to all

Expand

add to that the fact that if energy stocks in general come back into favour then we should see some increase in multiples - unlikely to get to s&p average but lest say they moved from where are today to 5. Using 5 to cmons numbers

138 * 5 = mc arnd 350 (net debt $340) = 51c = 35$

180* 5 = mc arnd 570 = 82c = 56$

likely chances we will see multiple increases is quite high especially given that we should start to see the wheat being seperated from the chaff as the industry consolidates, geopolitical tensions remain high and capex spends low. 2020 not without headwinds of course but if oil price remains elevated and snde can lock in some nice hedges for 2021 prodn then management imo will go for increased prodn so they can pay down debt a little faster.

SEA Price at posting: 16.5¢ Sentiment: Buy Disclosure: Held
4 Upvote

0 Great analysis

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