Senex (ASX:SXY) share price higher on 20th consecutive quarter of record production

Senex comes in with results for the period ended 31 December 2021.

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Key points

  • Senex reports earnings today for the quarter ended 31 December 2021
  • Sales revenue gained 9% whereas net sales revenue gained 5%
  • Capital expenditures were far higher reflecting drilling and expansion projects
  • The company forecasts higher capital expenditure in FY22 by bringing forward projects, otherwise guidance remains unchanged.
  • Senex has climbed 57% in the last 12 months.

Shares in Senex Energy Ltd (ASX: SXY) are inching forwards today following the release of its report for the quarter ended 31 December 2021.

Shares opened at $4.60 and have held the fort since, now trading less than 1% in the green on thin volume, having traded sideways all week.

Senex share price gains on “continued growth in production”

The company outlined several investment highlights this quarter, including:

  • Quarterly production up 5% to 5.2 PJ, with growth at both Roma North and Atlas
  • Sales revenue up 9% to $38.7 million before hedging impacts.
  • Domestic gas sales agreement signed with Shell Energy Australia starting in 2022.
  • Total sales volumes of 4.9 PJ were 3% higher than the previous quarter.
  • Net sales revenue increased 5% on the prior quarter to $34.7 million.
  • As at 31 December 2021 Senex had cash reserves of $62.8 million and a net debt position of $12.2 million.

What else happened for Senex this quarter?

Growth in total sales volumes reflected increased sales from production due to increased production rates at Roma North and Atlas alongside reduced third-party gas purchases.

Capital expenditure was 193% higher for the quarter at $36.1 million, compared to Q1 FY22 at $12.3 million. The increase in cost base came from drilling programs and expansion projects throughout the half.

The company also finalised its agreement with Australia Pacific LNG to acquire undeveloped gas fields adjacent to the Atlas site.

These new fields “provide additional optionality to Senex’s development portfolio”. As a result, Senex is “reviewing the sequencing of its Surat Basin developments”.

With respect to the Surat Basin, Senex notes that daily production “reached a peak of 59 TJ/day during the quarter”.

Gas production was 5% higher than the prior quarter, signifying the “20th consecutive quarter of Surat Basin production growth”, Senex says.

Senex also entered into a binding Scheme Implementation Agreement with Posco International Corporation on 13 December.

The agreement will see 100% of Senex’s shares acquired for a cash offer price of $4.60 per share. In addition to the cash offer price, Senex’s “current intention is to pay a dividend of up to A$0.05 per share” for the half year ending 31 December 2021.

Senex expects a Scheme Meeting to occur in March 2022 and, if approved, the transaction is expected to be complete in late March 2022.

What’s next for Senex?

The company reiterated its previously announced guidance for FY22, albeit forecasting higher capital expenditures (CAPEX) for the year.

Senex now provides CAPEX guidance of between $120-$140 million, up from $70-$80 million at the last report.

Although, the upward revision in CAPEX comes as Senex aims to bring forward some of its production targets into cash flow.

For instance, some drilling activity – previously planned for FY23 – has been brought forward to FY22 to “fill available additional gas processing capacity at both Atlas and Roma North”.

It also aims to commit to “certain compression facility long-lead items for planned production expansion projects”.

The company forecasts production of 21-23 PJ and sales of its own product of 19–21 PJ in FY22. This should result in an EBITDA of $75–$85 million and free cash flow conversion of $50–$60 million.

Senex share price summary

As seen on the chart below, the Senex share price took off from the benchmark S&P/ASX 200 Index (ASX: XJO) in August and has since plateaued in the new year.

Nevertheless, it has still climbed over 57% in the last 12 months.

TradingView Chart

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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