Senex Energy Ltd

ASX:SXY

Earnings Call Transcript 2020-Q1

[Operator]

Thank you for standing by. And welcome to the Senex Energy Q1 FY '20 Quarterly Report. [Operator Instructions] I would now like to hand the conference over to Mr. Ian Davies, Managing Director and CEO. Please go ahead.

[Ian Richard Davies, CEO, MD & Director]

Thank you, Jennifer. Good morning all, and welcome to Senex Energy's Quarterly Results Conference Call for the First Quarter of FY '20. I’m Ian Davies, Managing Director and CEO. Our new CFO, Mark McCabe, is not with us this morning. He'll be joining Senex around early December, and we're looking forward to welcoming him onboard. Mark has extensive experience in both the Queensland gas industry and also the broader energy sector. He joined Origin in 1996, and for the past 9 years, has been the Chief Financial Officer and Deputy CEO of APLNG. So we're quite excited about Mark starting and bringing his knowledge and experience to Senex. I should also take this opportunity to thank Gary Mallett for his significant contribution to Senex. As we announced in June, Gary returned to his hometown in Sydney to take up a CFO role there, and we wish Gary all the best. So turning now to our results, and it was another fantastic quarter for Senex. We again reported strong operational performance, and we're very proud of some significant project milestones we achieved in the Surat Basin, but more on that in a moment. Starting with production, volumes increased by 9% to 337,000 barrels of oil equivalent. This was driven by strong oil performance, particularly from the Growler field and a big uptick in gas production at Roma North. At Roma North, we recorded a 34% increase in gas production, which was underpinned by 2 significant project milestones. Firstly, we commissioned the gas processing facility. This greenfield infrastructure project was delivered on time and on budget, and this is a great achievement. And I certainly like to thank the team. With the facility commissioned, the raw gas gathering network is now operating at lower pressure, which improves the rate and volume of gas desorbed from the coals in the reservoir, which, of course, was all part of the plan. Secondly, we have brought online the first 10 wells of the current 50 wells in the drilling campaign. We're seeing good production rates from some of these wells, and production for the field continues to increase. So with the facility commissioned and new wells brought online, we saw a material increase in production towards the end of the quarter. Production is now above 11 terajoules per day, which is a 40% increase since the end of the last quarter. All in all, the outlook for Roma North is exciting. We have 40 wells on production and up to 40 more to be drilled as part of the current campaign. With daily production above 11 terajoules, we're already approaching our initial daily capacity of 16 terajoules or roughly 6 petajoules per year through the facility. Given this trajectory, we're now assessing options for gas processing capacity expansion, and we'll keep you updated with progress as and where appropriate. Turning to Project Atlas, and it's a similar story of key milestones and significant achievements. Firstly, with our partner, Easternwell, we commenced the drilling campaign. The first well in the Project Atlas acreage was spudded during the quarter, and we have now drilled 14 wells of the current 60 well campaign. Initial results have been excellent with net coal intersections of up to 44 meters. With these initial wells drilled and completed, we began bringing them online and we saw immediate gas production. This marks first -- excuse me, this marked first production from the Project Atlas acreage, which is another fantastic achievement that we are very proud of. First production took less than 18 months from the grant of the petroleum license (sic) [ Petroleum Lease ], and I believe this is unprecedented for a Queensland greenfield gas development and certainly gas developments outside of Queensland. We now have 7 Project Atlas wells online and are already seeing daily production rates approaching 1 terajoule combined. Gas is currently being produced to flare prior to commissioning of the gas processing facility by Jemena. And speaking of Jemena, they are doing a fantastic job with the facility and the pipeline. Construction and commissioning of the pipeline is now complete, and commissioning of the gas processing facility will commence next month. This means we'll produce first gas sales from the facility by the end of the year, and we'll be delivering gas into our new gas sales agreements with our customers from 1 January 2020. During the quarter, we also made good progress with our Gemba gas discovery in the Cooper Basin. We completed the production test and are now working on tie-in to the existing Santos-operated gas gathering network, and we expect to be selling processed sales gas to the South Australian domestic market by the end of 2019 also. I'll touch now briefly on our headline financials, which this quarter are relatively straightforward. Sales volumes of 319,000 barrels of oil equivalent was 6% higher than the prior quarter and tracked broadly in line with production. Similarly, our realized oil price was in line with the prior quarter, meaning a slight increase in total revenue to $24 million with more gas in the sales mix. CapEx was $41 million and was up slightly over the last quarter as the drilling program continued and gas gathering networks and water handling infrastructure progressed. Lastly, we remain in a strong financial position with a net cash position of $32 million at quarter end. Our cash position, of course, was boosted by the sale of the Roma North gas processing facility to Jemena, which realized $50 million of cash. Jemena is now operating the facility and is achieving excellent uptime and operational performance. So that's a fairly quick overview of what we regard as a very, very good quarter for Senex. As you can see, we continue to hit every single milestone and we are delivering strong operational performance. We are in a great position to finish the bulk of our current Roma North and Project Atlas work programs by the end of FY '20 and to exceed our initial Surat Basin production capacity of 18 petajoules a year by the end of FY '21. So with that, now that will conclude the formal part of the conference call. And I'd like to open the lines to Q&A. Thank you.

[Operator]

[Operator Instructions] There are no further questions at this time. I will now hand back to Mr. Davies for closing remarks.

[Ian Richard Davies, CEO, MD & Director]

Thanks, Jennifer. So clearly, very clear. Ladies and gentlemen and certainly those on the webcast also, thank you very much for listening. We look forward to updating you again next quarter. Thank you, and good morning.