Finalises debt package with ANZ
Along with its 4Q production result, Senex Energy (SXY) announced that it had finalised debt funding to support the dual development of its two key gas projects, Western Surat Gas Project (WSGP) and Project Atlas. SXY impressively locked in a A$150m senior secured debt facility against its flagship unconventional assets. The facilities were a A$125m reserve-backed lending and A$25m working capital facility. A 7-year term, the facilities have a 6% interest rate. Cheaper and longer than we expected, the other positive is the flexibility of the debt which can be upsized or repaid early without any penalties (highlighting a refinancing opportunity down the track).
Senex Energy released its annual reserve estimates, with 1P reserves increasing 21% to 20.2 mmboe, and 2P reserves jumping up 35% to a significant 113 mmboe. Of particular interest remains the progression of WSGP, where the inclusion of Phase 2 (30 wells) drilling, and the Mimas-2 core well (which stepped out significantly). Reserves also increased on the inclusion of Project Atlas (2P 144 PJ), which was awarded during the year and sits in a core Surat location.
Cooper Basin got further to run
The free carry BPT-SXY agreed on in the Cooper Basin continues to yield encouraging results. The joint venture is progressing well, a win-win agreement that saw $43m of remaining free carry for SXY by BPT transferred from economically-challenged unconventional gas in the Cooper to prospective conventional oil exploration on the Western Flank. The joint venture is planning on drilling a further three horizontal wells, which could add further value if similar to the results posted by Growler-15.
After making minor adjustments to our model for the 4Q result, and lowering our assumed cost of debt to 6% (was 6.5%), our valuation-derived share price target has been increased slightly (Morgans clients can login to view).
In addition to an attractive organic growth profile, we also continue to see corporate appeal in SXY that will be expanded by further reserve growth. The key risk is development of key gas assets.
Senex Energy remains one of our key preferences in the Oil and Gas sector. We maintain our Add recommendation.
Morgans clients can login to view our detailed report and increased share price target for Senex Energy (SXY). Alternatively, please contact your Morgans adviser or nearest Morgans office for access.
Disclaimer(s): Morgans Corporate Limited was a Participating Broker for the Block Trade of shares in Senex Energy Limited and received fees in this regard.
A Director of Morgans Financial Limited is a Director of Senex Energy Limited and will earn fees in this regard.
Analyst owns shares.
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