US onshore oil and gas producer, Sundance Energy Australia Limited (ASX: SEA) is keeping its strategic focus on operating within cash flow to deliver prudent growth. In the corporate presentation published on 11 March 2019, the company informed about its firm commitment to operating within cash flow during 2019.
The company’s high-quality asset base is enabling growth even at lower oil prices. The company’s deep inventory of wells with full-cycle break-even costs of around $30.00 per boe (barrels of oil equivalent) allows Sundance to deliver production and EBITDA growth under various oil price scenarios.
In the presentation, the company has also provided an update about the production and sales volume growth. The 1Q19 volumes were impacted by Sundance’s decision in late 4Q18 to slow down the development in response to the pronounced commodity price decrease. The volumes in the first quarter were additionally curtailed by 1,500-2,000 barrels of oil equivalent per day (boepd) due to the previously disclosed, short-term midstream capacity constraints.
Currently, the company is having a strong balance sheet and significant liquidity, with no debt maturities until the third quarter of 2022. The company is having sufficient available liquidity to fund development through free cash flow. Even just running 2019 EBITDA guidance midpoint forward and ignoring anticipated future growth, the company is having sufficient cash flow to service current debt levels as indicated by elevated Debt Service Coverage Ratio.
The year 2018 was the transformational year for the company. In 2018, the company executed $221.5 million Pioneer JV acquisition and raised around $600 million of new equity and debt capital. During the year, the company brought 23 new wells online, growing average daily net production to more than 10 million barrel of oil equivalent per day.
In the presentation, the company also provided an overview of its assets. The company is having around 52,300 net acres primarily in the Eagle Ford’s Oil and Volatile Oil Windows. The company’s 436 drilling locations are representing 17 years of inventory life at planned 2019 development rate. The company’s assets are economic on a full-cycle basis even at around $30/bbl oil, inclusive of recovering acquisition costs, and all development, production and overhead costs.
The company has also announced its audited reserve report in which it announced year-end 2018 proved reserves as estimated by Ryder Scott Company, L.P. of 93.2 million barrels of oil equivalent (MMboe) representing a PV-10 of $1,110 million as calculated under US Securities and Exchange Commission (SEC) guidelines.
Now, let’s have a glance at the company’s stock performance and the return it has posted over the past few months. SEA’s shares traded at a price of $0.366, up by 2.817% during the day’s trade with a market capitalization of ~$244.76 Million as on 11 March 2019. The counter opened the day at $0.360 and reached the day’s high of $0.370 and touched a day’s low of $0.355 with a daily volume of ~ 3,169,459. The stock has provided a year till date return of 2.90% & also posted returns of -50.69%, -24.47% & -12.35% over the past six months, three & one-months period respectively. It had a 52-week high price of $1.050 and touched 52 weeks low of $0.290, with an average volume of ~ 3,993,074.
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