SEA - Sundance Energy Australia

[BrightGreenGlow]

SEA added another 2.5c today, so was a very good day and the trend is looking strong. . After the close still twice as many buyers and 5 times the amount of units in the Buy side.

 

[Mofra]

Will be interesting to see how the market is valuing SEA. The 900 bopd taregt for December seems to be well below the longer term forecasts (even as a benchmark) mentioned in the investor presentation released a short time ago as an announcement.

Is it possible the $$$$ per acre discount relative to it's peers is driving the price?

 

[condog]

Will be interesting to see how the market is valuing SEA. The 900 bopd taregt for December seems to be well below the longer term forecasts (even as a benchmark) mentioned in the investor presentation released a short time ago as an announcement.

Is it possible the $$$$ per acre discount relative to it's peers is driving the price?

imo - It has a low valuation to:

its peers
its reserves
its flows and future flows

The Bakken is amazing quality and thers a big shift from offshore to onshore, compounded by a big shift from dry gas to liquids rich plays.

SEA has both. Its low mcap makes it an attractive buy and an attractive TO target in my opinion. DYOR and seek good expert advice, not bad expert advice.

 

[condog]

Very few SEA shares for sale 298K. Thats by SEA standards extremely low. Looks good for some upward pressure.

 

[Mofra]

Trading Halt - any clues? I understood all of their 2011 drilling program was covered by operational cashflow & the last cap raising at 13.5c.

 

[ParleVouFrancois]

If you read the announcement it states that it's a placement to a new shareholder. Tbh I wasn't expecting this, fully funded for 2010 + 2011 I would thought, with the sale of Twister for 9 million. Perhaps management have found cheap acreage to buy? Otherwise I'm not sure at all as to why they'd sell more shares at this point, still a bit more to run to reach fair value.

 

[condog]

From Announcment

Sundance Energy Australia Limited (SEA) requests the ASX grant a Trading Halt pending an announcement relating to a share placement. The company is not aware of any reason that a Trading Halt should not be granted.

"relating to a share placement" not a share holder. The term Capital raising would generally be used if it was only being offered to institutionals. This generally would mean an SPP offered to current share holders. Id say they have an acerage acquisition planned and need funds or plan to accelllerate thier current drilling program, and hence need to bring forward spending of capital.

If they have done an SPP within the last 12 months they cannot do an SPP. I am unaware of any SPP within the last 12 months.

Knowing SEA though id think its the former.

they had 14.9M cash at end of last quarterly and only planned on spending 6.6M in the current quarter , so there was no need for capital under the current plan. Its my opinion, they have an exciting opportunity. Disc - i do not hold, but wish i did.

 

[AngusSmart]

Good news, Might be time for entry for me!

relating to this, i dont hold SEA at the moment, but my girlfriend does.. is the offer goes thur and the current price doesnt drop close to offer i would like to pick some up thru her.. does anyone know the costs involved with transferring shares from her account to mine once they are allocated?

 

[condog]

Good news, Might be time for entry for me!

relating to this, i dont hold SEA at the moment, but my girlfriend does.. is the offer goes thur and the current price doesnt drop close to offer i would like to pick some up thru her.. does anyone know the costs involved with transferring shares from her account to mine once they are allocated?

You write to your broker and do an off market transfer, cost vary, but generally slightly dearer then a on market trade.
PLUS CGT if applicable, as you must trade at current sp, to avoid ATO chasing you imo.

 

[BrightGreenGlow]

Just had a quick look at the announcement... they did a 17.4million capt raising for instiutions and sophisticated investors at a 51c price.... I wouldn't have thought the SP would rise 1c on this news... oh well all is good however there is now 30 buyers and 30 sellers.... units are still x2 on the buyers side though

 

[ParleVouFrancois]

Where's my offer for shares at 51 cents? I'd take them all .

On the plus side I think this implies that management need the money quick, so they'll be able to spend it quick and get a return rapidly. With returns on Eagle Ford Shale wells on the order of 50 to 100% in the first year and SEA having similar payback times, any raising at these prices will increase the intrinsic value of SEA immensely so I'm still happy. Lots of money in the SEA kitty for the quality management to buy cheap, farmout a bit for profit, keep a trailing interest for revenue. Good business if you can get it.

 

[Mofra]

As I read it it isn't just funds to accelerate existing developments:

Proceeds from the Placement (net of transaction costs) will be used to fund:
• an accelerated Bakken development program through CY'11 (approximately
A$5 million);
• evaluation and development of Sundance’s Niobrara, Arriba, Wattenberg and
Pawnee prospects (approximately A$9 million); and,
• advancement of acquisitions proximal to existing shale acreage and in line with
the Company’s existing strategy (approximately A$3 million).

I read this as perhaps the company viewing their current acreages as undervalued and wishing to purchase more before the market realises. Given their history in creating value from acreages & farm-outs this reads as a positive.

 

[BrightGreenGlow]

2.5c down today and not looking so great tomorrow. Sellers have more volume than buyers... do you guys think it might head down to the 51c mark???

 

[Assasin]

2.5c down today and not looking so great tomorrow. Sellers have more volume than buyers... do you guys think it might head down to the 51c mark???

I was a bit grumpy when the recent CR was announced at 51c when the sp was around 59-60 at the time. I thought there was to big a gap and that SEA was also on the verge of marching through 60c at the time IMO.
I also thought it would retrace back to low 50's.
However, I've been convinced otherwise and this slight hesitation in momentum will be highly beneficial in the long run as SEA is well placed to not only march through 60c but move well beyond.
The news and announcements from this region just get better and better, the demand on resources globally is growing causing oil prices to remain high.
Personally, i'm hoping for a bit more of a retrace this week for me to increase holding.
Happy days ahead for SEA.

 

[condog]

Euroz put out an updated Target/valuation on SEA last week of 80c, they where very positive about SEA going forward with its accellerated program imo.

 

[BrightGreenGlow]

So do u guys think the SP will go back to that 51c price and then start to build again maybe?

 

[condog]

Sundance Energy Ltd (SEA $0.57) Buy
Price Target: $0.80/sh
Reason For Update: Company update and completion of capital raising
Investment Case:
Given strong production results the lack of geological risk we expect shale sector tailwinds
will gain further momentum over the coming period with companies involved in the
proven commercial shale oil plays like SEA to be the key benefi ciaries. Future reserve,
production and earnings growth are very likely for SEA.
We have increased our valuation and price target by 23% to $0.80/sh – this incorporates
further recent outperforming production results into our model (increasing the type curve)
and a more aggressive Bakken drilling program over the next two years (EOG, Hess and Helis
operated). Recent production wells have outperformed SEA’s budgets by >100%.
Production is forecast to double over the next year from primarily its Bakken assets, 900-
2,000 boepd, >90% oil.
Following the capital raising (34.2m shares @$0.51/sh, raising $17.4m), SEA is funded for its
Bakken development drilling program going forward (>80 wells in the next 15 months at
5-10% average interests). We expect it will continue to farm down its Niobrara acreage to
crystallize value before drilling commences from the June Q’11. The equity raising will also
give SEA fl exibility to move on various acreage acquisitions it has identifi ed, in and around
its existing acreage positions.
We expect SEA will book a large increase to its 1P and 2P reserves (say >50%) and
commission its inaugural 3P reserves in the Mar Q’11. Due to the low risk nature of these
resource plays, 3P reserves are a good guide to future 2P and 1P reserves – we estimate
SEA will book >45 mmbbls 3P valuing it at a very cheap <$3/boe EV/3P reserves.
The Niobrara oil shale is poised to be the next big oil shale in the US based on recent
transactions and well results – SEA has a high quality >13,000 acre position which in time
could well dwarf its producing Bakken acreage.
We are confi dent SEA’s strategy of being the early entrant into quality resource plays will
pay off - acreage is king in shale plays and SEA has >90,000 shale acres, at least half of
which is good quality, liquids shale.

Comments:
Williston Basin – Bakken Shale
The recent 30 and 60 day production results from SEA’s Bakken wells give us increased
confi dence on SEA’s shale oil development program ahead in the Bakken.
Average production rate results to-date include:
Cash fl ow from an average 924 boepd for 60 days nets SEA ~US$4m (@ US$85/bbl, post
royalties and taxes) suggesting a 6-9 month payback based on well costs averaging
US$8.5m – excellent economics.

SEA currently has 6 rigs drilling 1 well per month on its Bakken acreage at 5-10% average
non-operating interest – this activity is set to increase by up to 50% with new rigs arriving
in the next few months.
The Helis operated Dodge 4-6-7H (SEA 6.4%) well has been outstanding, one of the best
in the Bakken after 90 days. The strong average plateau fl ow rate between the 60 and 90
days at ~1,350 boepd (almost all oil) is particularly pleasing. The Andrecovich 5-17/16H
(SEA 7.1%) has also been very strong with a higher 30 day average fl ow rate than the
Dodge well at 1,419 boepd.
The difference between short lateral (~4,500 ft lateral, 10-15 frac stages, US$5-6m gross
cost) and long lateral (~9,000 ft lateral, 18-30 frac stages,US$8-8.5m gross cost) wells is
evident just from the early stages of SEA’s development program. Long lateral wells will
“hold” 1,280 acres and look to be roughly double the results of the short lateral wells
which “hold” 640 acres. This bodes well for the robust economics of the long lateral
wells but it is still early days in determining the decline profi les and ultimate reserve
recovery of each type of well.
Our production forecasts are in line with company guidance at this stage but incorporate
a six month lag whilst we wait to see what sort of impact the horizontal Niobrara wells will
net next CY. Our cash fl ow forecast is $34m for FY’12 – healthy for a $113m EV company
with forecast production and earnings growth ahead.
DJ Basin – Niobrara Shale
SEA recently sold ~ 5,000 acres of its DJ Basin acreage, Colorado, focused on the Niobrara
acreage for US$8.7m and a 3.9% overriding royalty to Noble Energy Inc.
SEA reduced its interest in the Twister prospect from a 60% interest to 15%.
The consideration was US$8.1m cash and US$0.6m in carry through future drilling.
The cash portion is subject to further adjustment following DD to be completed in the
next 30 days.
SEA has also established an Area of Mutual Interest (AMI) with Noble.
Noble is a leading operator of horizontal development wells in the region.
The sale represents ~10% of SEA’s DJ Basin acreage and ~25% of its Niobrara acreage
position.
SEA retains ~13,000 net Niobrara acres.

Our production forecasts are in line with company guidance at this stage but incorporate
a six month lag whilst we wait to see what sort of impact the horizontal Niobrara wells will
net next CY. Our cash fl ow forecast is $34m for FY’12 – healthy for a $113m EV company
with forecast production and earnings growth ahead.
DJ Basin – Niobrara Shale
SEA recently sold ~ 5,000 acres of its DJ Basin acreage, Colorado, focused on the Niobrara
acreage for US$8.7m and a 3.9% overriding royalty to Noble Energy Inc.
SEA reduced its interest in the Twister prospect from a 60% interest to 15%.
The consideration was US$8.1m cash and US$0.6m in carry through future drilling.
The cash portion is subject to further adjustment following DD to be completed in the
next 30 days.
SEA has also established an Area of Mutual Interest (AMI) with Noble.
Noble is a leading operator of horizontal development wells in the region.
The sale represents ~10% of SEA’s DJ Basin acreage and ~25% of its Niobrara acreage
position.
SEA retains ~13,000 net Niobrara acres.

SEA reserves Comparison Table:
SEA AUT EKA MPO AZZ Average
1P Reserves (mmboe) 5.1 2.9 1.1 4.5 1.5 3.0
2P Reserves (mmboe) 8.2 8.5 3.4 9.2 8.2 7.5
EV ($m) 129 425 58 307 153 214
EV/1P Reserves ($/boe) 25 147 53 68 102 79
EV/2P Reserves ($/boe) 16 50 17 33 19 27

 

[ParleVouFrancois]

Imo it wont drift to 51 cents off the back of the recent placement, why would the people who just bought in at 51 cents sell out? At most imo it'd go down to 52 cents, however not saying it won't go lower due to American markets declining or something, just that purely due to the placement, I doubt it'd go close to a 1 or 2 cent margin.

 

[skc]

Imo it wont drift to 51 cents off the back of the recent placement, why would the people who just bought in at 51 cents sell out? At most imo it'd go down to 52 cents, however not saying it won't go lower due to American markets declining or something, just that purely due to the placement, I doubt it'd go close to a 1 or 2 cent margin.

Isn't that the same logic as IPO should never tank below the issue price on debut? Yet they do all the time...

 

[ParleVouFrancois]

Sorry SKC you're right, my last post did seem to imply that, I'm quite tired from work so you'll have to forgive the sloppy posting.

"So do u guys think the SP will go back to that 51c price and then start to build again maybe?"

I meant it as in, SEA doesn't 'have' to touch 51 cents before it goes higher, because the additional selling pressure from the placement will all but disappear as it approaches that mark, and it'll only be left with what I call the "natural" selling pressure (e.g. people losing patience with the stock, the 365 day CGT time limit expiring, etc etc). However it may well go below 51 cents, but it would be a stretch to blame the recent falls from 60 cents purley on the placement pricing.

(Hope that explains it a bit more clearly)