Sundance Reports the Third Quarter Figures; ERA Under lens Over Entitlement Offer  

  • Nov 20, 2019 AEDT
  • Team Kalkine
Sundance Reports the Third Quarter Figures; ERA Under lens Over Entitlement Offer  

plunge in the crude oil market across the globe had exerted tremendous pressure on the oil-linked products, and the stock prices of ASX-listed oil & gas explorers such as Sundance Energy Australia Limited (ASX: SEA) had taken a hit over the fall.

The Brent crude oil futures plunged from USD 71.95 (high on 16 November 2019) per barrel to USD 56.15 a barrel at the end of the third quarter; however, the prices of oil are under recovery with the Brent crude oil futures trading at USD 60.94 a barrel (as on 20 November 2019 01:15 PM AEST).

The demand and supply dynamics for the oil market is still in doldrums with the global production restoring in higher proportion to the demand, which in turn, has kept a lid on the oil gains. The industry experts anticipate that the global demand for oil would the most important factor to decide the oil prices ahead amid the surplus supply situation currently prevailing in the global market.

To Know More, Do Read: EIA Forecasts on the Brent Crude Oil; Crude Oil Prices Likely to be Demand-driven Ahead?

The oil production in the United States averaged about 12.4 million barrels a day (as on 8 November 2019) with ASX-listed oil & gas producer in the United States- Sundance playing its part. Sundance reported decent operational and financial metrics for the third quarter, and the company is all set to inch up the production over the coming quarter, which remains in line with the EIA forecasts of an increase in crude oil production in the United States at the end of the year 2019.

Sundance Energy Australia Limited (ASX: SEA)

SEA is a leading oil & gas producer in the United States with a strategy of sustainable and systematic expansion. The company holds 51.903 net acre position the Eagle Ford Shale with a strong asset base.

Operational Highlights

SEA turned 12 gross and 12.0 net wells to sales in the Live Oak County and finalised the drilling at four gross and 4.0 net well at H Harlan Bethune pad in Live Oak County. Apart from that, the company additionally drilled the 2 gross and 2.0 net well at the Justin Tom pad in the Atascosa county.

As per the company, the laterals for each of the Justin Tom wells have gross perforated intervals over 12,700 feet, which makes them the longest wells drilled in the Atascosa county.

  • Sundance spud 2 gross and 2.0 net well at the Washburn Ranch pad in La Salle County and finished the drilling of these wells. The activities undertook by the company during the third quarter at the La Salle County underpins the quality of the company’s inventory and also represents the first development activity by SEA at the La Salle County.
  • SEA completed the 2019 drilling plan ahead of schedule, amid significant drilling efficiencies and reduced average drilling days per well, and also laid down rigs to commence the 2020 drilling program.
  • The midstream partner of the company expanded the CGP-41 to increase the gas processing capacity from 18 million standard cubic feet per day to 28 million standard cubic feet a day, which is estimated by SEA to get complete in the last quarter of the year 2019.

Financial Metrics

The net sales volume during the quarter stood at 1,251,144 barrels of oil equivalent, which underpinned an increase of ~22 per cent in the net sales against the previous corresponding period (or pcp). The oil sales surged by ~ 64 per cent in the third quarter against the pcp, while gas sales and NGLs sales surged by ~20 per cent and 16 per cent against pcp, respectively.

  • The oil sales volume, which stood at 8,677 barrels per day, remained at the upper end of the guidance range of 8,400 to 8,700 barrels a day; however, the gas and NGLs sales volumes of ~ 4,923 barrels of oil equivalent a day remained below the guidance- 5,600 to 5,800 barrels of oil equivalent a day.
  • The total revenue during the quarter stood at USD 51.1 million, down by 5 per cent against the pcp amid lower oil prices in the international market.
  • However, the net income improved significantly against the pcp to stand at USD 13.4 million, representing a 33 per cent net income margin.
  • The adjusted EBITDAX stood at USD 35.8 million and represented an approx. 67 per cent Adjusted EBITDAX margin and 18 per cent growth against the pcp.
  • Post excluding hedging, the average realised price during the quarter stood at USD 57.23 per barrel for oil, USD 1.84 per million cubic feet of gas, and USD 13.18 per barrel of NGL.

On the cost counter, the company continued progressing towards reducing the cash operating cost with total cash operating costs of USD 13.83 per barrel of oil equivalent, down by ~ 24 per cent against the pcp.

Hedge Position

  • Sundance hedged covered a total of 3,593,000 barrels for delivery through 2023, and the overall hedge covered ~ 8,000 barrels oil per day for the remainder of 2019 with a weighted average floor of USD 60.16 a barrel.
  • The figures represent about 90 per cent of the expected oil sales in the remaining 2019 and exclude rolled off hedge for the first ten months of the year 2019.
Hedge Position Overview (Source: Company’s Report)

FY20 Guidance

SEA estimates average sales volume of 13,500 to 14,000 barrels of oil equivalent a day for the fourth quarter as further 12 new wells came online in Q3 along with an extended reach of lateral Justin Tom wells.

Sundance also revised the full-year average sales volume estimation to 13,300 to 13,500 barrels of oil equivalent a day amid constrained capacity and high back pressure form the second expansion phase of the CGP-41 processing facility.

The overall progress of the company on a YTD basis stood as below:

(Source: Company’s Report)

SEA last traded at $0.165 on 14 November 2019, up by over 17.85 per cent against its previous close on ASX. The shares are on suspension in light of all Sundance shares to be acquired by Sundance Energy Inc. (a newly formed Delaware corporation) holding company.

Energy Resources of Australia under the lens of Takeovers Panel

While, the ASX-listed U.S. oil & gas explorer made operational progress, the uranium energy player- Energy Resources of Australia Limited (ASX: ERA) is under the lens of Takeovers Panel in Australia concerning to the proposed Entitlement Offer by the company on 15 November 2019. ERA announced a entitlement offer to raise around AUD 476 million.

Also Read: Australia Anticipates lower Uranium Exports; ERA Climbs 15% for the Month

The Australian Government Takeovers Panel received an application from the Zentree Investments Limited, in which Zentree mentioned that the minority shareholders are not being given reasonable or equal opportunity to participate in benefits flowing to Rio Tinto via the Entitlement Offer.

Zentree Investments Limited also sought interim orders related to delay the Entitlement Offer and to prevent ERA from issuing new shares to any person in connection to the offer and to prevent the ERA from closing the offer period for the entitlement offer.

Zentree also sought the final orders concerning to the cancellation of the Entitlement Offer and underwritten agreement between ERA and Rio Tinto Limited (ASX: RIO), if any, and also requested in the application that, ERA should be prevented for 12 months from the Panel’s decision to enter into any transaction, which increases the voting power of any person or any company over 20 per cent or increase in the voting power of any person or company already holding above 20 per cent of it without approvals from the shareholders of ERA.

As on 20 November 2019, the stock of the company last traded at $0.165, flat against the previous close on ASX (AEST: 12:22 PM).


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