The Senex Energy Ltd (ASX: SXY) share price is this morning edging higher after the oil and gas company reported production and earnings before interest, taxes, depreciation and amortisation (EBITDA) growth at the top end of upgraded guidance. At the time of writing, the Senex share price has risen 3.8% to 27 cents. Senex Energy is delivering on its promised transformation into a material east coast natural gas producer with considerable expansion in the works.
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What does Senex Energy do?
Senex Energy is an oil and gas exploration and production company. It has a portfolio of onshore assets located in Queensland and South Australia. Senex has 16 oil fields in the Cooper Basin, Australia's largest onshore oil and gas province. The company also holds around 2,000 square kilometers of gas acreage in the Surat Basin on Australia's east coast.
What's moving the Senex share price?
The Senex share price was boosted after the company reported a 73% increase in production which reached 2.1mmboe. Sales revenue increased 28% in FY20 to reach $120 million. Underlying EBITDA increased 51% to $53 million and operating cashflow was up 16% to $52 million. During the financial year, Senex Energy completed its $400 million Surat Basin gas development project. This means a platform is now in place to support material production expansion and acceleration from extensive gas reserves positions.
CEO Ian Davies said, "Our success in FY20 sees Senex's transformation to a diversified oil and gas producer now complete. We have a low-cost business model with a diversified asset portfolio and material acceleration and expansion growth."
With the onset of coronavirus, Senex Energy implemented protocols to mitigate the impacts of the pandemic. This ensured business continuity and uninterrupted operations throughout the critical period. Capital works programs continued on schedule. Action was also taken to streamline operations which will deliver material and ongoing cost savings. "Senex remains a highly cost competitive, agile, and scalable business well positioned to deliver on its growth strategy," said Davies.
What's the outlook for Senex Energy?
Senex Energy's outstanding production performance in FY20 has reset expectations. The company is now targeting production of 3.6 – 4.1mmboe from its foundation asset base. This is an increase of half a million barrels compared to baseline guidance provided earlier this year. With an ongoing focus on operating and cost efficiencies, Senex Energy has maintained FY22 earnings and cashflow targets despite the lower commodity price outlook.
The balance sheet remains strong with $80 million in liquidity at 30 June 2020. Deleveraging is underway with a targeted net cash position by the end of FY22. Davies commented, "After an incredibly successful year, Senex has unquestionably delivered the foundations to achieve a step change in annual production, cashflow, and earnings".
The Senex share price has recovered nearly 108% since its March low but has fallen 22.9% in year-to-date trading.
