Oil and gas producer Senex Energy Ltd (ASX: SXY) has greatly increased its revenues over the last three years from its growing oil production in the Cooper Basin. It's not as famous as Santos Limited (ASX: STO) or Woodside Petroleum Limited (ASX: WPL), but it is tapping into newly discovered oil wealth and earnings are rising.
Here are three reasons why Senex could offer investors good returns.
— Largest exploration acreage
The region has been producing oil for decades, but once unreachable oil and gas can be produced with new technologies. Senex's permits cover about 40% of the prospective acreage in the region. Much of the area is still not completely explored or tested.
Recent discoveries in the Western Flank area made with Beach Energy Limited (ASX: BPT) have exceeded initial production estimates, so there could be more to follow.
— Teaming up with industry leaders
The company has an agreement with Origin Energy Limited (ASX: ORG) for a $252 million work program to evaluate tight gas sands in the southern part of the Cooper-Eromanga Basin.
If it can be successfully produced, Senex and Origin will have a potentially massive gas resource to sell on to the Australia Pacific LNG project (APLNG) for export from QLD.
— Production up, costs down
Oil production was at record highs in the second quarter. For FY2014, the company expects total production to be 1.4 million barrels.
In the first half, lower operating costs and higher sales volumes raised interim net underlying profit by 35.9% on the previous corresponding period.
And to top it all off, the company has a $91 million cash position as of 31 March 2014 and no debt.
The company has made impressive progress and there still may be more to come as the wide acreages are developed further. For an investor, it offers solid earnings from sustainable production and a strong balance sheet.
