SXY (ASX) Ann: Senex and GLNG amend WSGP gas sales arrangements

Originally posted by tt2000 ↑

There hasn’t been a separate announcement in relation to the debt facility as it has still yet to receive financial close.

The announcement only states “Further, Senex has entered into a A$150 million debt facility commitment with ANZ to fund the development of its Surat Basin gas projects (refer to the ASX release dated 31 July 2018).”

At this stage, it remains a commitment – no difference to the position disclosed to the market on 31 July 2018 – we are still awaiting the announcement of when this reaches financial close – which ID indicated to be 4-8 weeks from the announcement 3 weeks ago.
He mentioned that with this he would disclose the FY19 outlook, baseline gas flow rates, IRRs, and then gas sale agreements (all price sensitive).

I do hope this comes toward the early range of his commitment (being next week), as without this the market currently has no indication whatsoever as to how commercial SXY’s assets are and explains the current meandering share price.

In terms of today’s announcement:

Previous Position:

Senex and GLNG agreed terms for the sale of up to 50 terajoules per day (TJ/day) of sales gas from the WSGP, subject to Senex taking a Final Investment Decision (FID) by September 2020 (the 2015 Agreements). Under the 2015 Agreements, upon Senex reaching FID, all gas from the Western Surat Gas Project would become exclusive to GLNG for the term of the gas sales agreement (approximately 20 years).

Revised Position:

Upon Senex reaching FID for a gas development relating to Roma North, only gas from Roma North becomes exclusive to GLNG for the term of the gas sales agreement (approximately 20 years), with terms (including price) consistent with those originally agreed – 16TJ

Gas sales to GLNG from the remainder of the Western Surat Gas Project remain subject to a future FID, with the expiry date for making such decision extended by two years to September 2022, with GLNG having the last right of refusal to any further volumes marketed. Enables SXY to retaining our ability to develop the remaining Western Surat Gas Project acreage in the future and at an appropriate commercial return.

The Revised Position indicates that SXY will now only immediately be contemplating FID for 16TJ relating to the WSGP (as opposed to 50TJ as originally planned).

Is this because they feel the other 34TJ is not commercial right now, or is this simply because they want to expedite the FID for the first phase.

Why is the last right of refusal no longer linked to a volume (the wording is now ‘to any further volumes marketed’

Why has FID taken so long

How many wells will be drilled to achieve the 16TJ and over what period – what contribution will the existing 30 wells achieve.

Given they have given GLNG the last right of refusal for the any further volumes marketed, does this indicate that they are no longer planning to partner with an infrastructure provider (like Jemena with Atlas) to sell processed gas (as opposed to raw gas)?

Here are some of the runs on the board of the incumbent management team:

Executed the Previous Position in September 2015 with GLNG – 3 years later we are renegotiating terms

Failed to achieve any FID

Failed to drill any further wells – it has now been a year since we completed the 30 WSGP wells

Write down of assets

Entering end of first quarter (25% of year) with no outlook

Last year we were more advanced that COE – which is why I chose to invest in SXY. Somehow, a year later, we are now lagging behind where COE is.

ID seems to talk the talk but is now consistently failing to hit anything – the latest announcement attest to SXY somehow going backwards over the last 3 years….

Disgraceful that he is earning close to $20k a week (plus receives bonuses on top of this) but is failing to deliver anything apart from talk about the ‘stepped change in production and revenue’ – what stepped change did we achieve this year?

No wonder EIG wanted out - back to 'hold' sentiment for me

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It is very likely that FID for the full 50TJ was not going to be approved at GLNG's contracted price.

So SXY split into two deals - 16TJ for which FID can be approved, and the remainder to be contracted at a commercial rate (with which GLNG is able to match - hence the last right of refusal).

From GLNGs point of view, they had to accept it as SXY had a condition precedent to the agreement, being FID, which wouldn't have been approved for the full 50TJ.

This should just about ensure that FID is reached soon for the 16TJ, which is probably what is holding up financial close for the financing.

I think (and hope) we will see this imminently now, and hopefully some answers to what we are all awaiting (FY19 outlook etc.) If this occurs (and all information is postivie), then I agree with pac about launching into orbit.

Patience is needed - but mine is at breaking point, especially with ID, who I am convinced could have got this launching sooner...

It is very likely that FID for the full 50TJ was not going to be...