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Why Senex Energy will smash the market

The Cooper Basin is back in full swing as one of Australia’s most valuable assets for oil production. The region is pumping out oil at rates not seen for 20 years and is in the early stages of a potential gas boom.

Senex Energy (ASX: SXY) is one of the region’s key operators and the company has been smashing its own records over the last 18 months. Last week Senex announced its first-quarter production figures which continued the trend, contributing record oil revenues up 19% on the previous quarter.

For Senex this means $39 million in cash flow and the capital to pay for the company’s rapid growth programme, which will see it drilling up to 30 new wells over the coming year.

The speed of programme itself is also breaking records inside the company. Senex’s Burruna-2 exploration well was drilled, completed and placed on production all within the first quarter. This success in commercialising the company’s assets is set to quickly grow cash flows.

Senex has no debt, $105 million in cash and another $20 million set to flow through from the sale of a stake in the Cuisinier oil field. This cash will be used towards the oil drilling program which will in turn fund longer-term development of the company’s natural gas assets.

It seems strange then that investors are not more excited by the company. Shares in Senex are up just 0.6% in the last 12 months, compared to the monster 19% rally of the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO). This is despite announcing a strong full-year profit and increase in reserves.

Some of the regions other operators have also lagged in share price, with the exception of Santos (ASX: STO), which has climbed 30% in the last 12 months as it nears completion of its two major LNG projects.

Foolish takeaway

Senex is a strong performing company that is on track to achieve big growth. The flat share price growth suggests investors are uncertain about the company’s long-term chances, but given the company’s expected growth path and success to date, the mid-sized energy producer is in a perfect position to smash the market in the coming years.

Senex does not pay a dividend, but you can discover The Motley Fool's favourite income idea for 2013-2014 in our brand-new, FREE research report, including a full investment analysis! Simply click here for your FREE copy of "The Motley Fool's Top Dividend Stock for 2013-2014."

Motley Fool contributor Regan Pearson owns shares in Senex Energy.

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