Key takes from Conference call $14M free cash flow from...

Key takes from Conference call

• $14M free cash flow from operations
• Ramp up on Roma North continues to exceed project estimates – and is expected to continue to ramp up
• SXY’s first well processing facility is well progressed at Roma North for 16TJ (1mmboe) facility with ability to expand in 8TJ modules - to be finished in next few months, with commissioning due mid 2019
• Gemba test of material gas source coming up - plus Westeros 3D seismic to open up a new exploration front in the basin
• By end of 2019:
  • SXY will have commissioned 16TJ + 32TJ in processing plants
  • Drilled significant proportion of drilling
• Between 1.0 and 1.5 mmboe production for FY19 forecast versus 0.84 mmboe in FY18
• SXY has $74M cash plus $90M liquidity = $164M in liquidity plus operating cash flow (generated at $14M for half a year)
• Drilling in Q2 – ID expecting slight acceleration in drilling of wells
• Gemba in order 30 million boe in place with 40-45% recovery, focus on getting undeveloped reserves out of Gemba. Keeps growing. Expect to see more of this. It has high permeability, high quality, with under developed reserves for secondary recovery (24 minute mark of conference)
• Atlas uncontracted gas – bespoke gas sales agreements (from small to large), fixed plus CPI to commodity linked. Implied like they want to lock in prices in the shorter term (to pay off infrastructure costs), but leave sales uncontracted into the future to be able to take advantage of upside in gas prices.

My take on the review of the results and conference call was is that it is finally an extremely promising time to be a shareholder:

• In the next 4 months we will have our own 16TJ processing plant commissioned.
• Drilling starts for 110 wells back to back (any time in Q2 - which starts in March)
• 32 TJ processing plant planned for Dec
• Gemba - watch that space (as others have previously pointed out).

I know I got this excited last year (and nothing was delivered), but I think the wells and rapid expansion is almost a given now. SXY simply needs to deliver operationally (and has hopefully learnt from the Roma North wells). If they deliver this has the makings to be one cash cow. (It is already generating $14M cash for the half year).