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The energy market is under pressure from multiple factors varying from the introduction to IMO 2020 to the fall in crude oil prices. Energy stocks on ASX are facing the headwinds and shunning off prior gains witnessed in them during the last quarter of the year 2019.
Also Read: IMO 2020- A Double Edge Gizmo for Woodside Petroleum and Caltex Australia
However, despite a considerable turbulence across the energy market, be it falling retail margins, fall in LNG reference price due to the oil spill, many ASX-listed energy companies and fossil fuel suppliers such as Senex Energy Limited (ASX:SXY), Paladin Energy Limited (ASX:PDN), Caltex Australia Limited (ASX:CTX) are adopting measures to absorb heat shocks of the energy market.
Also Read: Strong Electricity Consumption Yet Weaker Profitability for Origin Energy and Whitehaven Coal
While energy retailer AGL Limited (ASX:AGL) had cautioned the market that the near-term challenges would prevail, it becomes paramount for the peer to adopt measures, which could assist them in dealing with the tougher energy market conditions.
To Know More, Do Read: AGL Sails Despite Market Challenges; Says Operating Headwinds To Persist
Senex Energy Limited (ASX:SXY)
- Development Across Surat and Cooper Basin
SXY recently completed the ongoing Roma North drilling campaign and drilled 35 wells at industry-leading cycle times and well costs. The Company re-mobilised the Easternwell Rig 27 to the Project Atlas, the first dedicated domestic gas acreage. The drilling at the prospect would start within a week, and SXY intends to complete the campaign by the end of the financial year 2020.
The gas production at the Surat basin is on track towards the initial plateau of 18 petajoules per year, and the Company is undergoing through a review concerning number of wells required to reach the initial plateau gas production with potential for reduction.
As on 31 December 2019, SXY held a cash reserve of $123 million, and currently, nearly two-thirds of the oil production is hedged at an average price of USD 70 a barrel, which is equivalent to $95 a barrel.
Apart from that, over 300,000 barrels of the upcoming production (FY2021) is hedged at an average price of USD 67 a barrel or $90 a barrel.
SXY Oil Hedge (Source: Company’s Report)
SXY last traded at $0.267, up by 6.8 per cent against its previous close on ASX.
Paladin Energy Limited (ASX:PDN)
- PDN Secures Ministerial Consent to Sell Paladin (Africa) Limited
PDN just secured the ministerial consent to sell 85 per cent of the Company’s interest in Paladin (Africa) Limited to Lotus Resources Limited, which holds 65 per cent interest, and to Lily resources Pty Ltd, which holds 20 per cent interest.
The Company suggested that the Minister of Natural Resources, Energy and Mining and the Minister for Finance, Economic Planning and Development nodded to the sale of PDN’s interest, which is now subject to the one last approval from the Reserve Bank of Malawi and is expected to be received on or before 13 March 2020.
The benefit associated with the sales are as below:
- The disposal of Paladin (Africa) Limited would reduce the ongoing care and maintenance costs of ~ USD 5 million per year associated with the Kayelekera Mine; and,
- Apart from that, a consideration of $5 million, which comprises of $200,000 cash and $4.8 million in Lotus shares’ would be issued to Paladin for $1.8 million on completion, reflecting 90 million shares at $0.02 a share, subject to a 12-month voluntary escrow and $3 million on the third anniversary of completion.
- A royalty of 3.5 per cent upon the revenue from future production at Kayelekera, capped at $5 million.
- PDN would also receive the funds provided as a security against environmental performance bond, which accounts for USD 10 million, and the repayment would occur in four tranches, including USD 4 million on Completion, USD 1 million, USD 2 million, and USD 3 million on the first anniversary, second anniversary, and third anniversary, respectively.
Post the sales, PDN anticipates a reduction of USD 10 million per annum in its annual cash burn, and it would provide further guidance on FY2021 cash expenditure around June 2020. Also, the sale would enable the Company to allocate its capital and resource on the Langer Heinrich Mine in Namibia for the restart once the uranium incentive price improves to provide a suitable return on capital to shareholders.
Other key terms of the transaction
- The Share Sale Agreement date has been extended to 13 March 2020 for receiving the final conditions precedent.
- Upon completion, PDN would pay a consent fee of 1 per cent of the aggregate principal amount of the Notes outstanding to the Noteholders, which is assessed to be USD 1.15 million.
- PDN received the Tax Clearance from the Malawi Revenue Authority, for which Tax Clearance liabilities are estimated to USD 1.25 million.
Also Read: The Oil Spill: U.S. Refineries Pullback Production as Acquisition Cost Surmounts and Demand Tumbles
The stock of the Company last traded at $0.080, down by 2.43 per cent against its previous close on ASX.
Caltex Australia Limited (ASX:CTX)
- EG group eyes Caltex
CTX received a non-binding, indicative and conditional proposal from the EG Group Limited concerning the acquisition of all the outstanding share of CTX via a scheme of arrangement.
Post the careful consideration of the proposal, including the risk, costs and complexities, the Board of the Company has turned down the offer and assessed that the proposal from EG group undervalues CTX and does not reflect the compelling value of shareholders.
However, the Board of the Company fathoms that it would be beneficial for shareholders to engage further with the discussions for a potential transaction.
CTX reported a weak financial year 2019 with a fall of 7.09 per cent in Fuels & Infrastructure EBIT (excluding Lytton). The Convenience Retail EBIT of the Company plunged by 34.52 per cent against pcp, while the Replacement Cost of Sales Operating Profit stood at $607 million, down by 26.51 per cent against pcp.
To Know More, Do Read: Oil Search and Caltex Encountering Weaker Price Challenge Amid Market Disturbance from IMO 2020 and Coronavirus
The stock of the Company last traded at $31.950, down by 2.29 per cent against its previous close on ASX.
