High growth gas producer Senex Energy (ASX:SXY) today announced that its major investment Project Atlas is now operational, after first lease was granted in March 2018.
Senex partnered with major energy infrastructure provider Jemena to build, own and operate a 15 petajoule per annum (40 TJ/day) gas processing facility. Natural gas from Project Atlas will supply major Queensland manufacturers including CSR, Orora and O-I.
Since July 2017, Senex has ramped up gas production significantly in its Roma North fields and has cumulatively produced 2.5 petajoules of gas, reaching 8 terajoules per day at the end of FY19.
With the addition of gas from the Project Atlas site, management’s target of delivering a Surat Basin gas production rate of 18 petajoules per annum by the end of FY21 seems achievable – and signifies immense growth in the top line. As with many mining and energy businesses, however, costs must be watched with a hawks eye. Cash presently sits at $12.7 million, although it would appear the majority of high CapEx new projects have passed.
Is Senex a buy?
After increasing revenues 34% to $94.1 million and operating cash flows from $5.3 million to $44.5 million in FY19, it would seem the current market cap of $516.9 million is still pricing in a lot of further growth.
Senex, like many other energy and mining companies is not a widely held position on Strawman, sitting at #140 in the company rankings. This may be for good reason, as this industry typically requires very high upfront costs, involves significant execution risks and margins are at the mercy of commodity pricing.
However, with many of the early stage hurdles now cleared, it could be worth a closer look.
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