The Australian Energy Review - - FRONT PAGE - reuben ADAMS


SENEX has a plan to take ad­van­tage of sig­nif­i­cant op­por­tu­ni­ties in a struc­turally short east coast gas mar­ket. With a suc­cess­ful re­cent cap­i­tal rais­ing and sup­port from heavy­weight en­ergy in­vestor EIG Global En­ergy Part­ners, the gas pro­ducer looks set to progress its West­ern Su­rat Gas Project (WSGP) in Queens­land; progress op­por­tu­ni­ties in the Cooper Basin; and pur­sue com­pany-build­ing ac­qui­si­tions.

SPE­CIAL­IST en­ergy in­vestor EIG Global En­ergy Part­ners be­came a sub­stan­tial Senex share­holder in Fe­bru­ary this year; a deal that could prove a game changer for the ASX 300 com­pany.

EIG has made de­vel­op­ment fund­ing avail­able, in­clud­ing up to $US300M for the West­ern Su­rat Gas Project sub­ject to in­vest­ment de­ci­sions and ap­provals, and has taken a stake of 12 per cent in Senex with an EIG rep­re­sen­ta­tive to join its Board. Around the same time that EIG joined Senex’s share regis­ter, Senex suc­cess­fully raised $91 mil­lion when it of­fered EIG, in­sti­tu­tions and re­tail share­hold­ers the op­por­tu­nity to par­tic­i­pate in the com­pany’s growth plans.

To­gether, this ad­di­tional fund­ing will sup­port Senex’s pur­suits in oil and gas op­por­tu­ni­ties on the east coast.

But the strate­gic ra­tio­nale for the re­la­tion­ship with EIG ex­tends be­yond fund­ing one or two projects – Senex will now have the funds, and back­ing, to ac­tively pur­sue ac­qui­si­tion op­por­tu­ni­ties. Senex also ex­pects the in­vestor’s strong tech­ni­cal team to as­sist in the de­vel­op­ment of the WSGP.

Senex chief ex­ec­u­tive Ian Davies said the com­pany had fur­ther strength and mo­men­tum to take ad­van­tage of sub­stan­tial op­por­tu­ni­ties in the east coast gas mar­ket, by de­vel­op­ing and ex­pand­ing its sig­nif­i­cant up­stream po­si­tions in both the Su­rat and Cooper Basins.

“We know the West­ern Su­rat Gas Project is a great as­set, given our un­der­stand­ing of the sub­sur­face and our abil­ity to op­er­ate safely and at low cost,” Mr Davies said.

“EIG is a re­spected global en­ergy in­vestor and their sup­port shows they also see the op­por­tu­nity for Senex to build a sig­nif­i­cant east coast gas busi­ness.”

In Fe­bru­ary, EIG chief ex­ec­u­tive Blair Thomas said the West­ern Su­rat Gas Project was in prime po­si­tion to sup­ply gas into the struc­turally short east coast gas mar­ket.

“EIG has been an early in­vestor in coal seam gas in Queens­land since the late 1990s, and we be­lieve now is the op­por­tune time to de­velop these as­sets as fun­da­men­tals are sup­port­ive,” he said.

“Senex has the right peo­ple to de­velop the project and in long-term part­ner­ship with EIG we be­lieve the Com­pany will build a tier-one as­set.”

Nat­u­ral Re­sources and Mines min­is­ter Dr An­thony Lyn­ham wel­comed the news as the lat­est sign of in­vestor con­fi­dence in QLD’S gas sec­tor.

“This shows real mar­ket con­fi­dence in our re­sources sec­tor and par­tic­u­larly Queens­land’s $70 bil­lion CSG-LNG in­dus­try,” Dr Lyn­ham said.

“This in­dus­try al­ready di­rectly em­ploys 5000 peo­ple and sup­ports more than 60,000 full­time jobs.

“We un­der­stand this project will gen­er­ate up to 100 jobs, of which 80 will be lo­cal roles in drilling and con­struc­tion.” An­a­lysts also ap­plauded the deal. Im­por­tantly for Senex, Mor­gans noted, EIG’S ex­pe­ri­ence and tech­ni­cal ca­pa­bil­i­ties would of­fer po­ten­tial in­sights as the WSGP pro­gressed to­wards full-scale de­vel­op­ment.

“We al­ready had a pos­i­tive view on Senex prior to the deal, be­liev­ing the com­pany was well po­si­tioned to pur­sue growth at the low point in the en­ergy cy­cle,” Mor­gans stated in a re­search note.

“De­spite the down­turn in oil prices, Senex has steadily repo­si­tioned the busi­ness to fo­cus on gas – while main­tain­ing zero debt on the bal­ance sheet.

“We see sig­nif­i­cant up­side po­ten­tial on of­fer in Senex, with key risks be­ing the oil price and WSGP’S op­er­a­tional per­for­mance.

“This pos­i­tive view has been re­in­forced by the deal with EIG, which has joined Senex’s regis­ter with aligned in­ter­ests, which will al­low Senex to bring for­ward the de­vel­op­ment of WSGP.”

Credit Suisse stated the part­ner­ship could be “the start of some­thing beau­ti­ful”, es­pe­cially when I came to op­por­tu­ni­ties for value adding as­set ac­qui­si­tions.

“We strongly be­lieve, and there­fore sin­cerely hope, that this strate­gic ar­range­ment ex­tends to inor­ganic op­por­tu­ni­ties,” Credit Suisse stated.

“There is now a cred­i­ble part­ner­ship that brings tech­ni­cal ca­pa­bil­i­ties and fund­ing ca­pac­ity to play in the big­ger end of town.

“Frankly, with the do­mes­tic gas in­dus­try still in paral­y­sis, the gas mar­ket needs some­one to de­velop these as­sets not sit on them.

“Fi­nally we might have some­one will­ing to ac­tu­ally do some­thing rather than just talk.

“What we be­lieve this ar­range­ment does is pro­vide a plat­form from which value is able to be added.

“For those look­ing for ex­po­sure to the East Coast gas mar­ket, Senex looks an in­creas­ingly at­trac­tive op­tion now.”

Now, ac­cord­ing to The Aus­tralian news­pa­per, Senex and EIG could be bat­tling it out with Beach En­ergy for Ori­gin’s up­stream Lat­tice En­ergy as­sets, worth more than $1 bil­lion.

Late last year, Ori­gin an­nounced plans to di­vest by ini­tial pub­lic of­fer­ing (IPO) its con­ven­tional up­stream busi­ness – dubbed Newco, then re­named Lat­tice En­ergy – in­clud­ing in­ter­ests in the Ot­way Gas project, Bass­gas project, Kupe Gas project; and the Perth, Cooper, Bon­a­parte and Can­ter­bury basins.

In May, Ori­gin man­ag­ing di­rec­tor Frank Cal­abria said the com­pany had con­tin­ued “to make good progress on the di­vest­ment of Ori­gin’s con­ven­tional up­stream busi­ness, Lat­tice En­ergy, dur­ing cal­en­dar 2017”.

In April Senex also re­sponded to the QLD Gov­ern­ment’s Call for Tenders for a Petroleum Lease (PL) on acreage in the Su­rat Basin and an Author­ity to Prospect (ATP) on acreage in the Bowen Basin.

“The acreage re­lease rep­re­sents an im­por­tant op­por­tu­nity to sup­port the State’s growth and de­liver crit­i­cal en­ergy sup­ply to the do­mes­tic mar­ket,” Mr Davies said.

West­ern Su­rat Gas project

The WSGP is about 30 kilo­me­tres north of Roma in Queens­land, ad­ja­cent to ex­ist­ing coal seam gas fields which pri­mar­ily sup­ply to LNG trains for GLNG and APLNG.

The project spans 915sqkm and is ex­pected to sup­port up to 425 wells drilled over 20 years or more.

Senex com­pleted a gas pi­lot in De­cem­ber with raw gas pro­duced and sold to GLNG.

Senex’s cur­rent project ac­tiv­i­ties com­menced in June, re­flect­ing a $50 mil­lion in­vest­ment pro­gram to fur­ther ap­praise the project area, and in pur­suit of an in­dica­tive gas pro­duc­tion rate of up to 10 ter­a­joules per day, or about 0.6 mm­boe per year, by mid-2018.

These ac­tiv­i­ties in­clude a 30-well drilling pro­gram and con­struc­tion of wa­ter and gas gath­er­ing fa­cil­i­ties. These fa­cil­i­ties in­clude the up­grade of an ex­ist­ing dam on the Eos block to cur­rent stan­dards; in­stal­la­tion of un­der­ground pipe­lines and gas and wa­ter cus­tody trans­fer me­ter­ing skids; and in­stal­la­tion of a 36km un­der­ground gas and wa­ter gath­er­ing net­work.

The com­pany was also un­der­tak­ing ap­praisal ac­tiv­i­ties west of the Eos block in par­al­lel with the drilling pro­gram, and pro­gress­ing full field de­vel­op­ment plan­ning in­clud­ing re­quired reg­u­la­tory ap­provals, na­tive ti­tle and land ac­cess ac­tiv­i­ties.

cooper Basin

In South Aus­tralia, Senex holds an ex­ten­sive acreage po­si­tion across the Cooper Basin, one of Aus­tralia’s most pro­lific on­shore oil and gas prov­inces. Boast­ing a 2P re­serves po­si­tion of 10.8mm­boe, Senex has re­cently pri­ori­tised high value oil op­por­tu­ni­ties over the west­ern flank, which is re­spon­si­ble for about 80 per cent of the com­pany’s cur­rent pro­duc­tion.

In the north­ern Cooper Basin, it was de­vel­op­ing its Vanessa con­ven­tional gas field in a joint ven­ture (JV) with Beach En­ergy.

The com­pany also an­nounced plans in March to ac­cel­er­ate gas de­liv­ery from Vanessa – to be brought on­line in FY18 – with the ap­proval of $5.82m in fund­ing through the South Aus­tralian Gov­ern­ment’s Plan for Ac­cel­er­at­ing Ex­plo­ration (PACE) Gas Grant Pro­gram.

The first round of PACE Gas Grants saw five ex­plo­ration and de­vel­op­ment projects share in $24m in State Gov­ern­ment fund­ing.

En­ergy Min­is­ter Tom Kout­san­to­nis said the grants would gen­er­ate up to $174m in new in­vest­ment by oil and gas com­pa­nies in lo­cal pro­duc­tion projects.

“Gas ex­tracted through the grant scheme will be of­fered to South Aus­tralian elec­tric­ity gen­er­a­tors first, in­creas­ing the af­ford­abil­ity of sup­ply and putting down­ward pres­sure on power prices,” Mr Kout­san­to­nis said.

Mr Davies said the fund­ing would con­trib­ute to the cost of in­fra­struc­ture to con­nect the Vanessa gas field with South Aus­tralian cus­tomers.

“This gas project will de­liver new gas pri­mar­ily from the Senex-op­er­ated Vanessa field in the north­ern Cooper Basin to South Aus­tralian do­mes­tic cus­tomers,” Mr Davies said.

As east coast de­mand in­creases, Senex has also fo­cused on longer term ex­plo­ration plays in the Cooper Basin to sup­port this de­mand.

It re­cently drilled the pi­o­neer­ing Sil­ver Star-1 gas ex­plo­ration well in the Cooper Basin.

Senex’s deep gas project with Ori­gin En­ergy and Planet Gas was tar­get­ing basin-cen­tred and strati­graph­i­cally trapped gas in the Patchawarra and Al­lunga Troughs, and rep­re­sented one of Aus­tralia’s only on­shore gas ex­plo­ration in­vest­ments over the last year.

“Drilling of Sil­ver Star-1 re­flects our com­mit­ment to un­lock­ing high risk gas acreage in the Cooper Basin and to de­liv­er­ing more sup­ply for the east coast mar­ket,” Senex stated in June.

The Sil­ver Star-1 DW1 well reached a to­tal depth of 4969m on 1 June, in­clud­ing a hor­i­zon­tal sec­tion of 1180m within the Patchawarra For­ma­tion.

Gas shows in the hor­i­zon­tal sec­tion were in line with ex­pec­ta­tions, but dur­ing cas­ing of the well, un­sta­ble coals through the hor­i­zon­tal sec­tion col­lapsed and dam­aged the cas­ing it­self.

The com­pany stated that the well had been sus­pended while a for­ward plan was fi­nalised.

“As there is no prece­dent for the drilling of a hor­i­zon­tal well through the Patchawarra in the Cooper Basin, the out­comes are con­sid­ered within the bounds of pos­si­bil­i­ties for such pi­o­neer­ing deep gas ex­plo­ration,” the com­pany stated.

“The joint ven­ture re­mains com­mit­ted to eval­u­at­ing ma­te­rial gas re­sources in the per­mit area.”

“THE COM­PANY ALSO AN­NOUNCED PLANS in march TO AC­CEL­ER­ATE GAS de­liv­ery from VANESSA – TO be brought ON­LINE in fy18.”

All im­ages: Senex.

Senex En­ergy chief ex­ec­u­tive Ian Davies.

the Sil­ver Star-1 gas drilling rig in the Cooper basin.

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