The Senex Energy Ltd (ASX: SXY) share price is pushing higher today after the company released an investor briefing that detailed a transformational growth strategy.
After opening a massive 17% higher this morning at $0.24, Senex shares have since pulled back to be trading 5.85% higher for the day at $0.217.
Senex Energy is an Australian oil and gas exploration and production company that operates in Queensland's Surat Basin and South Australia's Cooper Basin.
What did Senex announce today?
Further details of Senex's growth strategy were revealed today which will see increased annual production, cash flow and earnings from its Surat Basin gas development projects.
The company revealed that oil and gas production is forecast to triple from FY19 levels to more than 3.6 mmboe in FY22. This milestone is set to be reached without any growth capital expenditure.
Additionally, Senex is now forecasting annual earnings before interest, tax, depreciation and amortisation (EBITDA) of $100 million to $110 million and free cash flow of $70 million to $90 million from FY22. These forecasts are for the first full year of Surat Basin plateau production.
The company will also undergo a rapid deleveraging of its current balance sheet. Peak net debt is now targetted to come in at under $80 million in the first quarter of FY21. Meanwhile, Senex is aiming for a Net Debt:EBITDA ratio for FY22 of less than 0.5x.
Senex also reaffirmed its FY20 production guidance which currently sits within the range of 1.8 to 2.0 mmboe, while its EBITDA guidance will remain within the $40 million to $50 million range.
Additionally, the company confirmed it will generate Surat Basin development capital expenditure savings due to strong production performance. This will be supported by a reduction in its overall well counts to 85, which represents a significant 20% reduction.
Project Atlas update
At Atlas, the company reported it has completed its Roma North drilling campaign, with only 35 wells required to reach initial plateau production.
After a thorough revision of its Atlas capital program, Senex noted in today's release that it has identified an opportunity to build, own and operate water treatment infrastructure. This is of critical importance to its program.
The company has further identified an opportunity to remove ongoing water treatment tolls over the lifespan of the entire project.
Management commentary
Commenting on today's release, Senex Managing Director and CEO Ian Davies said:
"The high quality, low-cost nature of our Surat and Cooper Basin assets, together with our best-in-class execution capability, has enabled Senex to deliver a transformation in our business."
"Senex's robust Balance Sheet, proactive hedging strategy and approach to gas contracting provide Senex with resilient cashflows to support the execution and ramp-up of our Surat Basin gas development projects," he added.
