Senex Energy Ltd (ASX: SXY) is an $860 million mid-tier oil and gas producer. Its flagship assets are located in the highly prospective Cooper Basin, alongside fellow ASX-listed oil and gas companies such as Drillsearch Energy Limited (ASX: DLS) and Beach Energy Limited (ASX: BPT). However Senex stands out as one of the best resources stocks in the S&P/ASX 200 (ASX: XJO) (^AXJO).
In FY13, Senex grew oil sales, profit and oil production over 100% compared to FY12. For the 2014 half-year, Senex's gross profit jumped 26%, whilst EBITDA increased 32%. Perhaps more importantly, the company is on track to add 4 million barrels (mmbbls) to 6 mmbbls of 2P reserves in FY14. At current production levels that could represent a reserves replacement ratio in excess of 300%, for the second year in a row.
With key infrastructure in place, Senex's operating costs reduced from $31 per barrel to $29 per barrel in the first half of FY14. By comparison in 2013 Woodside Petroleum Limited (ASX: WPL) – Australia's largest independent oil and gas company – had an oil production cost of US$34 per barrel of oil equivalent (boe).
In FY14 guidance provided by Senex's management is for production at the lower end of its forecast range of between 1.4 mmbbls to 1.6 mmbbls, up from 1.25 mmbbls in 2013. This is a result of the company's impeccable drilling success over the past 24 months.
Looking further ahead, its exploration is ongoing throughout much of the highly prospective Cooper-Eromanga Basin located on the border between South Australia and Queensland.
Bottom Line
Senex has no debt, growing reserves, is rapidly increasing production, is exploring a highly prospective area and has the macroeconomic tailwinds of higher oil and gas prices at its back. Yet it still trades on a price-earnings (P/E) multiple of 13! Between now and FY15 earnings per share can be expected to increase significantly and there's also a chance that a dividend could be declared.
