Sundance Energy’s Shares Down On Hedging Loss Of US$23.8 Million

Sundance Energy’s shares tumbled despite the company announcing ~70% rise in revenue for the three months ended 30 September 2018.

The sell off seems to be driven by the unrealized losses of US$23.8 million from commodity hedging. In the release of third quarter results, Sundance told that the average third quarter price including the impact of hedging was US $47.85 per Boe and US $62.62 per barrel, lower than the prices realized should the impact of hedging be excluded.

During these three months, the company generated US$53.8 million revenue, up approximately 78% on previous corresponding period’s revenue of US$31.58 million. Despite achieving significant growth in revenue, the company’s loss attributable to owners increased from US$6.02 million in 3Q FY17 to US$19.28 million for three months ended 30 September 2018. This reflects the increased cost relating to lease and workover expenses and an unrealized commodity hedging loss of US$23.8 million for the quarter ended September 2018.

Adjusted EBITDAX of the company for the third quarter of 2018 was US$30.4 million, representing a ~62% Adjusted EBITDAX margin. Whereas, at a margin of ~53%, adjusted EBITDAX for year to date 2018 was reported to US$51.9 million. As per the company’s information, these figures have not included the impact of non-recurring expenses incurred in relation to costs of acquisition and unrealized commodity hedging losses.

Sundance’s third quarter net production were ~65% oil, ~21% gas and ~14% NGLs by volume whereas, Net production by volume for year to date 2018 was ~61% oil, ~25% gas and ~15% NGLs. Further, the 2,323,329 Boe or approximately 8,510 Boe per day of net volumes produced for the year to date 2018. The company stated that Cash operating costs for the quarter of US $18.14/Boe were slightly higher as compared to US$15.05/Boe for the same prior year period due to Lease Operating Expense (“LOE”) that were increased during the period on higher gathering costs under the midstream agreements entered at closing of the Pioneer acquisition.

As of the date of this report, i.e. 16 November 2018, the Company is in the process of finalizing drilling of the Harlan Bethune pad and has already finished drilling the Hoskins pad, subsequent to which it released the Patterson 589 rig. During these three months Company completed drilling six additional gross (6.0 net) wells and further aims to finish the remainder of its 2018 drilling program by the end of fourth quarter.

Moreover, as of 15 November 2018, a total of 5,489,000 bbls of oil has been covered under the hedging through 2023. It includes a weighted average ceiling of US$63.52 and floor of US$56.08.

Looking into the next quarter, Sundance’s presented the net production guidance of 14,000 to 15,000 boe/d for the fourth quarter of 2018. And it further reaffirmed the full year’s 2018 net production guidance to 9,000 to 10,000 boe per day.

Sundance’s share price plunged 1.449% to last trade at $0.068 on 16 November 2018. But over the past one year, the stock of Sundance Energy Australia Limited (ASX:SEA) has witnessed a positive performance change of 13.56%.

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