Perhaps counterintuitively, shares of Cooper Basin oil and gas producer Senex Energy Ltd (ASX: SXY) traded slightly higher today following the announcement of its half-year results this morning.
In the six months to 31 December 2014, Senex reported a statutory net loss of $65.9 million, down from a profit of $31.8 million last year. The loss was largely a result of impairments to exploration assets and oil properties which it announced to the market earlier this month.
Net tangible assets per share fell to 37 cents per share, from 41 cents per share in the prior period.
With the impairments sparked by plunging commodity prices, today's loss comes despite record net production of 0.74 million barrels of oil equivalent, up 14% for the half. However underlying net profit – which strips away the effect of non-cash impairments, non-recurring items and taxation expenses or benefits – came in at just $1.6 million.
At 31 December 2014, Senex has $74.9 million of cash on its balance sheet, with no debt.
Whilst crashing oil prices have wreaked havoc on the company's share price in the past 12 months, Senex maintains a relatively low cost production profile, with an operating cost of $31 per barrel – compared to an average oil price received of $97 per barrel during the half.
Through hedging, Senex has locked in a floor price of $68 per barrel for the remainder of the financial year.
Commenting on the results Managing Director, Ian Davies, said, "Senex is working hard to deliver its full year production guidance and remains attentive to the volatile energy environment. We have acted sensibly to reduce operating costs and reallocate capital spend, without impacting our capacity to progress our portfolio of growth projects."
In addition to maintaining a strong balance sheet, Senex has continued to make progress with its gas operations. Mr Davies said, "During the half Senex successfully commenced gas production, with first commercial sales from our Hornet field in the Cooper Basin… These projects give us further optionality and business diversification to underpin delivery of longer term growth."
Should you buy or sell Senex Energy shares?
Senex Energy has a number of promising exploration and development blocks in the Cooper and Surat Basins and a capable management team. Unfortunately with the oil price crashing in recent times, its future has become less certain.
After buying at a much higher price, I recently sold my shares in Senex, as the plunge in oil took hold. With the price of Brent crude oil currently $US59 per barrel, I could've been a little hasty in making my decision. However, given the outlook, I didn't feel the risk-reward trade off was good enough to keep me in the stock for the foreseeable future. Despite this, it continues to be my number one high-reward stock pick for an oil price turnaround.
