Senex Energy Ltd (AX:SXY) has a diverse portfolio of conventional and unconventional oil and gas assets in Australia’s Cooper and Surat Basins. Its growing portfolio of projects is well placed to deliver new gas to meet the shortfall along Australia’s East Coast. Projects are underpinned by existing recoverable gas resources and robust demand. Consensus expects continued growth in Senex’s underlying oil business, with revenues enhanced by a rising oil price, with gas sales from two projects in Queensland (Western Surat Gas Project and Project Atlas) driving a step change in production. We note that the consensus valuation of A$0.41/share (Bloomberg average) heavily risks the NPV of Senex’s development portfolio and compares to an unrisked consensus NPV of A$1.18/share.
Selective investment across a diverse asset portfolio
Project Atlas was awarded to Senex by the Queensland government for zero consideration after a competitive tender process demonstrating the state’s confidence in Senex’s operational capability. Given the depth of the company’s portfolio, management is able to selectively invest available capital in projects that generate the highest risked returns, and has the benefit of pools of capital available from existing partners: EIG is looking to provide up to US$300m for WSGP and Beach (formerly Lattice) Energy’s c A$45m for unconventional gas exploration.
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