Australia’s Senex Energy announced a 38% year-on-year decrease in oil and gas revenue for the half year ended 31 December 2016 (1H FY17), and the establishment of a material gas business in Queensland.
During 1H FY17, earnings dropped to AU$22.8 million, primarily driven by low oil prices, and production was 410,000 boe, down 24% as a result of natural field decline and significantly lower capital expenditure over the previous two financial years.
The group recorded a gross loss of $0.6 million compared to a gross profit of $12.0 million the previous corresponding period.
Despite net losses, Senex has sanctioned its first major investment in the Western Surat gas project, committing $50 million to a 30 well drilling campaign, with gas production of around 10 TJ/d expected by mid-2018.
CEO Ian Davies said, “In the Surat basin we delivered our first pilot in the Glenora area ahead of schedule and on budget. In the Cooper basin, we maintained low-cost operations while delivering strong production performance, and resumed oil drilling with early success.
“We anticipate FY17 production of 0.8 MMboe, a direct reflection of over $150 million of reduced capital expenditure over the past two years as we focused on weathering the sustained downturn in oil prices.”
Davies added that an improving commodity price outlook and strong east coast gas demand supports the recommencement of the group’s Cooper basin work program and accelerated investment in the Surat basin.
“Looking ahead, we anticipate our Cooper basin oil and gas production profile to plateau before transitioning to growth in the near term. Further, we anticipate a material production contribution from our flagship Western Surat gas project from FY18, with gas volumes to increase year-on-year,” he said.
Last November, Senex completed the first pilot development in the Western Surat gas project. Known as the Glenora pilot, it involved the extraction of gas from coal seams across approximately 915sq km of acreage. To the west of Glenora, Senex also carried out work to rehabilitate legacy QGC wells on the Eos block.
“We have seen immediate gas to surface from the Glenora pilot wells, brought online for continuous production in early February. We have also seen evidence of strong gas flows from wells on the Eos block during rehabilitation works being undertaken on legacy QGC wells," Davies said.
"These results demonstrate that coal seams in the Glenora and Eos blocks have already been partially dewatered by neighboring operations. The sanctioned work program will further our understanding of the resource to support an accelerated project timeline, with potential to drill, complete and connect another 30 to 50 wells throughout 2018," he added.
“Under this scenario and subject to regulatory approvals, Senex can seamlessly transition to a development phase targeting gas production of over 16 TJ/day by 2019, equivalent to 1MMboe per annum. The recently announced strategic arrangement between Senex and EIG Global Energy Partners will facilitate these plans and support the delivery of material year-on-year volume growth.”
In February 2017, Senex announced a strategic arrangement with EIG Global Energy Partners and capital raising activities of up to $95 million. The firm conducted a raising of approximately $55 million via a placement to certain EIG-managed funds and other institutional investors at a subscription price of $0.315 per share. This was followed by an offer to all eligible shareholders to participate in a share purchase plan, capped at $40 million.
Image: Map of Western Surat gas project / Senex