Why this small-cap ASX energy share is surging higher today

Here's why the Senex Energy Ltd (ASX: SXY) share price is trading 6% higher today, after initially achieving gains of 17% in early trade.

a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

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.

Motley Fool contributor Phil Harpur has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

Stock market chart in green with a rising arrow symbolising a rising share price.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a massive day for the ASX 200, with a new all-time high recorded.

Read more »

A man sits thoughtfully on the couch with a laptop on his lap.
Technology Shares

This ASX tech stock rocketed 60% in March! Can it keep on delivering?

After soaring in March, the ASX tech stock is now up 169% since this time last year.

Read more »

Broker Notes

Brokers name 3 ASX shares to buy now

Here's why brokers are feeling bullish about these three shares this week.

Read more »

A young man clasps his hand to his head with his eyes closed and a pained expression on his face as he clasps a laptop computer in front of him, seemingly learning of bad news or a poor investment.
Share Fallers

Why Burgundy Diamond Mines, Clarity Pharmaceuticals, EML, and Zip are sinking today

These ASX shares are ending the week in the red. But why?

Read more »

A young women pumps her fists in excitement after seeing some good news on her laptop.
Share Gainers

Why Mesoblast, Newmont, Pilbara Minerals, and Platinum shares are jumping

These ASX shares are ending the week strongly. But why?

Read more »

a young boy dressed up in a business suit and tie has a cute grin and holds two fingers up.
Opinions

2 of my top ASX 200 shares to consider buying before April

I would happily exchange dollars for these two shares right now.

Read more »

Father in the ocean with his daughters, symbolising passive income.
Dividend Investing

I'd spend $8k on these ASX 200 shares today to target a $6,102 annual passive income

I believe these ASX 200 shares will continue rewarding passive income investors for years to come.

Read more »

Three businesspeople leap high with the CBD in the background.
Share Market News

Boom! ASX 200 blasts to new record highs

ASX 200 investors just sent the benchmark index into uncharted territory.

Read more »