BHP Billiton’s (BHP) US oil and gas cuts naturally dominated business news yesterday. So a much smaller hacking and slashing by oil and gas tiddler, Senex Energy (SXY) was overlooked by most investors.
Bringing sexy back into the Australian oil and gas sector? This time the privilege is not Justin Timberlake’s, but a small cap oil and gas exploration company mainly focused on Australia’s Cooper Basin, Senex Energy ((SXY)). You can tell from the company’s ASX-code there might be some pre-determined destiny in play.
First-half results were in line with expectations. Operating expenditure was ahead of expectations and this, along with sustaining capital expenditure, remains the key uncertainty and driver of value, Credit Suisse suggests.
The strong ramp-up in gas production in the December quarter has been offset by softer prices. Credit Suisse suspects declining LNG netbacks stemming from weak LNG spot pricing will have limited impact on Senex Energy because of term contracting.
The Roma North gas facility was commissioned on May 27. The company is on track to deliver processed sales gas to GLNG by mid-2019. The main concern for Credit Suisse is the pace of the production ramp-up upstream rather than the processing facility.
Credit Suisse believes Senex Energy is well positioned to benefit from higher domestic gas prices, as Project Atlas ramps up over the next two years. Yet, while the company has been touted as a takeover target, no bid has emerged.