Senex Energy Production and revenue unsurprised, cash builds on lower capex

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26 April 2018 Australia EQUITIES SXY AU Price (at 06:10, 26 Apr 2018 GMT) Outperform A$0.42 Valuation A$ 0.49 - DCF (WACC 9.1%, beta 1.5, ERP 4.0%, RFR 4.3%) 12-month target A$ 0.50 12-month TSR % +19.0 Volatility Index GICS sector High Energy Market cap A$m 608 30-day avg turnover A$m 1.1 Number shares on issue m 1,447 Investment fundamentals Year end 30 Jun 2017A 2018E 2019E 2020E Revenue m 46.9 66.8 104.0 141.3 EBIT m -22.4-0.6 8.3 15.4 Reported profit m -22.7-80.5 2.7 5.4 Adjusted profit m -22.5-1.0 2.7 5.4 Gross cashflow m 7.3 23.4 45.8 65.9 CFPS 0.6 1.6 3.2 4.6 CFPS growth % -74.4 180.0 95.4 43.9 PGCFPS x 72.6 25.9 13.3 9.2 PGCFPS rel x 4.90 2.16 1.24 0.96 EPS adj -1.8-0.1 0.2 0.4 EPS adj growth % -76943.9 96.1 nmf 102.4 PER adj x nmf nmf 227.8 112.5 PER rel x nmf nmf 14.89 8.52 Total DPS 0.0 0.0 0.0 0.0 Total div yield % 0.0 0.0 0.0 0.0 ROA % -4.6-0.1 1.4 2.4 ROE % -5.6-0.3 0.7 1.5 EV/EBITDA x 53.8 22.0 10.2 6.9 Net debt/equity % -30.7-14.6 5.6 0.9 P/BV x 1.1 1.7 1.7 1.7 SXY AU vs Small Ordinaries, & rec history Production and revenue unsurprised, cash builds on lower capex Key points SXY s production and revenue result was in-line with expectation. Production guidance remains, however, with Growler-15 horizontal performing ahead of expectation, we see a potential beat to production guidance. We have pulled back capex due to later than expected completion of the financing package. We are now towards the lower end of guidance. Event SXY released Q3 FY18 results, with production and revenue in-line. FY18 production guidance of 0.75-0.90mmboe (Macq: 0.85mmboe) and capex (excl. corporate) of A$75-95m (Macq: A$76m) was maintained. Impact Production in-line, gas increasing: Production of 0.19mmboe was in-line with our expectation and (Macq: 0.20mmboe) slightly below the previous quarter. Natural declines from oil (0.17mmboe) continued but gas (0.03mboe) volumes increased as WSGP continued to de-water. Volumes are expected to continue to rise in Q4, with potential upside from the Growler horizontal well. Lower sales and pricing hurts revenue: Revenue of A$14.0m was in-line with our forecast (Macq: A$13.3m), but down ~18% on the previous quarter. The reduction was impacted by an 11% fall in sales and an 8% fall in the realised oil price. Cash builds on lower capex: Surprisingly, capital expenditure was lower than expected, with only A$11.1m spent. We had expected higher expenditure (Macq: A$30.2m) as the company worked towards the Phase 3 drilling at WSGP, and beating guidance. However, until the financing package is complete, lower capital spend is likely to continue over Q4 FY18. As a result, SXY increased the cash balance by ~2% to A$83.3m. WSGP builds, Atlas holds: Volumes at the WSGP increased with expectation to >2TJ/d, with next phase of development (Phase 3) awaiting completion of the company-wide funding solution, expected in mid-2018. Note: Recommendation timeline - if not a continuous line, then there was no Macquarie coverage at the time or there was an embargo period. Source: FactSet, Macquarie Research, April 2018 (all figures in AUD unless noted) Earnings and target price revision EPS for FY18E falls slightly on slightly lower production. Price catalyst 12-month price target: A$0.50 based on a DCF methodology. Catalyst: Macquarie Conference presentation, completion of financing, oil price Action and recommendation Retain Outperform: SXY remains our preference in the mid-cap space with a number of catalysts that could work towards de-risking both WSGP and Project Atlas over the next 12 months. The result was unsurprising, but we expect to hear news flow on financing and the Phase 3 investment at WSGP in the ST, which will reduce some of the associated funding risk going forward. Please refer to page 7 for important disclosures and analyst certification, or on our website www.macquarie.com/research/disclosures.

Analysis With production in-line with expectation, revenue was also unsurprising. However, our miss on sales volumes was offset by stronger than expected realised pricing. Revenue was also down ~18% on the previous quarter, resulting from an 11% fall in sales and an 8% fall in realised oil prices. Fig 1 Quarterly production results were relatively in-line with expectation. Capital expenditure was below due to the completion of financing later than we had expected, resulting in the large capital items pushed out. Quarterly Results Macqe SXYa Delta Oil mmboe 0.16 0.17 0% Gas & Liquids mmboe 0.04 0.03 (36%) Net Production mmboe 0.20 0.19 (7%) Net Sales mmboe 0.20 0.17 (15%) Sales Revenue A$m 13.3 14.0 5% Average Realised Oil Price A$/bbl 66.20 82.35 (8%) Exploration/Appraisal A$m 26.2 7.8 (70%) Development, Plant & Equipment A$m 4.0 3.3 (17%) Total A$m 30.2 11.1 (63%) Source: SXY, Macquarie Research, April 2018 Guidance remains unchanged Senex announced that FY18 production and capital guidance would remain unchanged with one quarter remaining in the financial year. Production guidance 0.75 0.90mmboe (Macq: 0.85mmboe) YTD production sits at ~0.57mmboe. At current rates, SXY are on par to achieve low-end of production guidance by end-fy18. However, with the additional volumes from Growler-15 horizontal expected to give Q4 a boost, we see production reaching the high end. If Growler-15 continues to exceed expectation and WSGP de-watering carrying on as expected, we see potential for SXY to beat production guidance. We currently forecast the well to add an average ~1,200bpd over the quarter. Capital expenditure guidance (excl. corporate costs) remains between A$75-95m (Macq: A$76m) We have downgraded capital expenditure towards the low-end of the range due to the timing of achieving financing and lower than expected capex in Q3. We had expected financial close of the company funding package to be announced earlier, and with the company reiterating it would be mid-2018, we have pushed back capital from Phase 3 at WSGP in to FY19. Fig 2 YTD production is on par to achieve the low-end of production guidance, however if Growler-15 horizontal continued to beat expectations, this could push towards the top-end. Adjustment to our capital expenditure forecast results in SXY achieving the low-end of guidance. We do not see significant capital spend until the financing package is finalised. FY18 Guidance Senex Guidance Macq YTD YTD (%) Production Low High Total Production mmboe 0.75 0.90 0.85 0.58 70% Capital Expenditure Cooper Basin A$m 30 40 32 23 65% Surat Basin " 45 55 44 34 68% Total Capex A$m 75 95 76 57 67% Source: SXY, Macquarie Research, April 2018 26 April 2018 2

Surat Basin Production from the Western Surat Gas Project (WSGP) continues to ramp up, achieving rates of >2TJ/d as de-watering continues. This is expected to continue throughout Q4 and could receive an additional boost once the fix to surface facility issues are complete. Fig 3 Production profile for WSGP with additional compressors installed over the life of the project to reach ~50TJ/d by mid-2020s. Fig 4 We see WSGP in FY19 being a draw on capital as new wells and compressors are installed. The project is forecast to become cashflow-positive in late-2019. TJ/d 60 50 40 30 20 10 - A$m 30 20 10 - (10) (20) (30) (40) 2017 2018 2019 2020 Revenue Operating costs Production WSGP GLNG Max Volumes Royalties Tax Compressor Capacity Capex Project Free Cash Flow Source: SXY, Macquarie Research, April 2018 Source: SXY, Macquarie Research, April 2018 We forecast production at WSGP to increase to average ~2.5TJ/d over Q4. Senex continue to work on the method of bringing Project Atlas to market, with tolling through surrounding infrastructure remaining the preferred method. Once complete, which is expected mid- 2018, the company will work towards customer engagement in the domestic market. As a result, we see a number of catalysts that could help to de-risk both projects towards the mid-2018. Cooper Basin Production declines continues in the Cooper Basin over the quarter, down ~5% q-t-q, despite a number of periods of improvement as successful wells were tied-in, including Maurader-1. Growler-15 horizontal well, which commenced production in late-q3, is expected to support volumes over Q4 FY18. The well, which intersected 578m of net lateral pay achieved rates of ~1,850bpd, ahead of expectations. If this continues, the company could achieve the upper end of FY18 guidance. Fig 5 Production volumes were down ~5% q-t-q Fig 6 however, we forecast additional development in the Western Flank and CSG will see company production rise. mbbls 400.0 350.0 300.0 250.0 200.0 150.0 100.0 mmboe 3.00 2.50 2.00 1.50 1.00 0.50 50.0 - - 2015 2016 2017 2018 2019 2020 Crude Gas Condensate LPG Source: SXY, Macquarie Research, April 2018 Source: SXY, Macquarie Research, April 2018 26 April 2018 3

Fig 7 (SXY AU) Financials Source: SXY, Macquarie Research, April 2018 26 April 2018 4

Fig 8 (SXY AU) NAV Breakdown Source: SXY, Macquarie Research, April 2018 26 April 2018 5

Macquarie Quant View The quant model currently holds a strong negative view on. The strongest style exposure is Growth, indicating this stock has good historic and/or forecast growth. Growth metrics focus on both top and bottom line items. The weakest style exposure is Valuations, indicating this stock is over-priced in the market relative to its peers. 492/594 Global rank in Energy % of BUY recommendations 38% (3/8) Number of Price Target downgrades 1 Number of Price Target upgrades 1 Fundamentals Attractive Quant Local market rank Global sector rank Displays where the company s ranked based on the fundamental consensus Price Target and Macquarie s Quantitative Alpha model. Two rankings: Local market (Australia & NZ) and Global sector (Energy) Macquarie Alpha Model ranking A list of comparable companies and their Macquarie Alpha model score (higher is better). Factors driving the Alpha Model For the comparable firms this chart shows the key underlying styles and their contribution to the current overall Alpha score. Sino Gas & Energy -0.2 Sino Gas & Energy -1.3 Karoon Gas -1.8 Karoon Gas -3.0-2.0-1.0 0.0 1.0 2.0 3.0-100% -80% -60% -40% -20% 0% 20% 40% 60% 80% 100% Valuations Growth Profitability Earnings Momentum Price Momentum Quality Macquarie Earnings Sentiment Indicator The Macquarie Sentiment Indicator is an enhanced earnings revisions signal that favours analysts who have more timely and higher conviction revisions. Current score shown below. Drivers of Stock Return Breakdown of 1 year total return (local currency) into returns from dividends, changes in forward earnings estimates and the resulting change in earnings multiple. Sino Gas & Energy NaN Sino Gas & Energy 0.3 Karoon Gas 0.2 Karoon Gas -3.0-2.0-1.0 0.0 1.0 2.0 3.0-100% -50% 0% 50% 100% Dividend Return Multiple Return Earnings Outlook 1Yr Total Return What drove this Company in the last 5 years Which factor score has had the greatest correlation with the company s returns over the last 5 years. Operating Margin NTM EPS Growth FY1 CPS Growth FY1 Price to Sales LTM Return on Equity NTM Return on Assets NTM ROIC 12m Fwd Net Income Margin NTM -28% -28% -28% -31% Negatives Positives 24% 23% 22% 22% -40% -20% 0% 20% 40% How it looks on the Alpha model A more granular view of the underlying style scores that drive the alpha (higher is better) and the percentile rank relative to the sector and market. Alpha Model Score Valuation Growth Profitability Earnings Momentum Price Momentum Quality Capital & Funding Liquidity Risk Technicals & Trading Normalized Score -1.28-1.37 0.50-0.95-0.09 0.33-0.69-1.69-0.97-0.87 1.13 Percentile relative to sector(/594) Percentile relative to market(/359) 0 50 100 0 50 100 0 0 1 1 Source (all charts): FactSet, Thomson Reuters, and Macquarie Research. For more details on the Macquarie Alpha model or for more customised analysis and screens, please contact the Macquarie Global Quantitative/Custom Products Group (cpg@macquarie.com) 26 April 2018 6

Important disclosures: Recommendation definitions Macquarie - Australia/New Zealand Outperform return >3% in excess of benchmark return Neutral return within 3% of benchmark return Underperform return >3% below benchmark return Benchmark return is determined by long term nominal GDP growth plus 12 month forward market dividend yield Macquarie Asia/Europe Outperform expected return >+10% Neutral expected return from -10% to +10% Underperform expected return <-10% Macquarie South Africa Outperform expected return >+10% Neutral expected return from -10% to +10% Underperform expected return <-10% Macquarie - Canada Outperform return >5% in excess of benchmark return Neutral return within 5% of benchmark return Underperform return >5% below benchmark return Macquarie - USA Outperform (Buy) return >5% in excess of Russell 3000 index return Neutral (Hold) return within 5% of Russell 3000 index return Underperform (Sell) return >5% below Russell 3000 index return Volatility index definition* This is calculated from the volatility of historical price movements. Very high highest risk Stock should be expected to move up or down 60 100% in a year investors should be aware this stock is highly speculative. High stock should be expected to move up or down at least 40 60% in a year investors should be aware this stock could be speculative. Medium stock should be expected to move up or down at least 30 40% in a year. Low medium stock should be expected to move up or down at least 25 30% in a year. Low stock should be expected to move up or down at least 15 25% in a year. * Applicable to Asia/Australian/NZ/Canada stocks only Recommendations 12 months Note: Quant recommendations may differ from Fundamental Analyst recommendations Financial definitions All "Adjusted" data items have had the following adjustments made: Added back: goodwill amortisation, provision for catastrophe reserves, IFRS derivatives & hedging, IFRS impairments & IFRS interest expense Excluded: non recurring items, asset revals, property revals, appraisal value uplift, preference dividends & minority interests EPS = adjusted net profit / efpowa* ROA = adjusted ebit / average total assets ROA Banks/Insurance = adjusted net profit /average total assets ROE = adjusted net profit / average shareholders funds Gross cashflow = adjusted net profit + depreciation *equivalent fully paid ordinary weighted average number of shares All Reported numbers for Australian/NZ listed stocks are modelled under IFRS (International Financial Reporting Standards). Recommendation proportions For quarter ending 31 March 2018 AU/NZ Asia RSA USA CA EUR Outperform 54.38% 58.90% 48.35% 43.91% 69.03% 45.26% (for global coverage by Macquarie, 3.69% of stocks followed are investment banking clients) Neutral 32.48% 27.88% 34.07% 48.73% 21.29% 38.95% (for global coverage by Macquarie, 3.07% of stocks followed are investment banking clients) Underperform 13.14% 13.21% 17.58% 7.37% 9.68% 15.79% (for global coverage by Macquarie, 0.39% of stocks followed are investment banking clients) SXY AU vs Small Ordinaries, & rec history (all figures in AUD currency unless noted) Note: Recommendation timeline if not a continuous line, then there was no Macquarie coverage at the time or there was an embargo period. Source: FactSet, Macquarie Research, April 2018 12-month target price methodology SXY AU: A$0.50 based on a DCF methodology Company-specific disclosures: Important disclosure information regarding the subject companies covered in this report is available at www.macquarie.com/research/disclosures. Date Stock Code (BBG code) Recommendation Target Price 26-Apr-2018 SXY AU Outperform A$.50 12-Jan-2018 SXY AU Outperform A$.45 25-Oct-2017 SXY AU Outperform A$.40 06-Sep-2017 SXY AU Outperform A$.35 21-Jun-2017 SXY AU Neutral A$.30 03-Feb-2017 SXY AU Outperform A$.35 02-Feb-2017 SXY AU Outperform A$.40 27-Jul-2016 SXY AU Outperform A$.30 27-Apr-2016 SXY AU Outperform A$.35 09-Sep-2015 SXY AU Outperform A$.30 21-Aug-2015 SXY AU Outperform A$.35 28-Jul-2015 SXY AU Outperform A$.40 Target price risk disclosures: SXY AU: Any inability to compete successfully in their markets may harm the business. This could be a result of many factors which may include geographic mix and introduction of improved products or service offerings by competitors. The results of operations may be materially affected by global economic conditions generally, including conditions in financial markets. The company is exposed to market risks, such as changes in interest rates, foreign exchange rates and input prices. From time to time, the company will enter into transactions, including transactions in derivative instruments, to manage certain of these exposures. Analyst certification: We hereby certify that all of the views expressed in this report accurately reflect our personal views about the subject company or companies and its or their securities. We also certify that no part of our compensation was, is or will be, directly or indirectly, related to the specific recommendations or views 26 April 2018 7

This publication was disseminated on 26 April 2018 at 09:08 UTC. Macquarie Wealth Management expressed in this report. The Analysts responsible for preparing this report receive compensation from Macquarie that is based upon various factors including Macquarie Group Limited (MGL) total revenues, a portion of which are generated by Macquarie Group s Investment Banking activities. General disclosure: This research has been issued by Macquarie Securities (Australia) Limited ABN 58 002 832 126, AFSL 238947, a Participant of the ASX and Chi-X Australia Pty Limited. This research is distributed in Australia by Macquarie Wealth Management, a division of Macquarie Equities Limited ABN 41 002 574 923 AFSL 237504 ("MEL"), a Participant of the ASX, and in New Zealand by Macquarie Equities New Zealand Limited ( MENZ ) an NZX Firm. Macquarie Private Wealth s services in New Zealand are provided by MENZ. Macquarie Bank Limited (ABN 46 008 583 542, AFSL No. 237502) ( MBL ) is a company incorporated in Australia and authorised under the Banking Act 1959 (Australia) to conduct banking business in Australia. None of MBL, MGL or MENZ is registered as a bank in New Zealand by the Reserve Bank of New Zealand under the Reserve Bank of New Zealand Act 1989. Apart from Macquarie Bank Limited ABN 46 008 583 542 (MBL), any MGL subsidiary noted in this research,, is not an authorised deposit-taking institution for the purposes of the Banking Act 1959 (Australia) and that subsidiary s obligations do not represent deposits or other liabilities of MBL. MBL does not guarantee or otherwise provide assurance in respect of the obligations of that subsidiary, unless noted otherwise. This research contains general advice and does not take account of your objectives, financial situation or needs. Before acting on this general advice, you should consider the appropriateness of the advice having regard to your situation. We recommend you obtain financial, legal and taxation advice before making any financial investment decision. This research has been prepared for the use of the clients of the Macquarie Group and must not be copied, either in whole or in part, or distributed to any other person. If you are not the intended recipient, you must not use or disclose this research in any way. If you received it in error, please tell us immediately by return e-mail and delete the document. We do not guarantee the integrity of any e-mails or attached files and are not responsible for any changes made to them by any other person. Nothing in this research shall be construed as a solicitation to buy or sell any security or product, or to engage in or refrain from engaging in any transaction. This research is based on information obtained from sources believed to be reliable, but the Macquarie Group does not make any representation or warranty that it is accurate, complete or up to date. We accept no obligation to correct or update the information or opinions in it. Opinions expressed are subject to change without notice. The Macquarie Group accepts no liability whatsoever for any direct, indirect, consequential or other loss arising from any use of this research and/or further communication in relation to this research. The Macquarie Group produces a variety of research products, recommendations contained in one type of research product may differ from recommendations contained in other types of research. The Macquarie Group has established and implemented a conflicts policy at group level, which may be revised and updated from time to time, pursuant to regulatory requirements; which sets out how we must seek to identify and manage all material conflicts of interest. The Macquarie Group, its officers and employees may have conflicting roles in the financial products referred to in this research and, as such, may effect transactions which are not consistent with the recommendations (if any) in this research. The Macquarie Group may receive fees, brokerage or commissions for acting in those capacities and the reader should assume that this is the case. The Macquarie Group s employees or officers may provide oral or written opinions to its clients which are contrary to the opinions expressed in this research. Important disclosure information regarding the subject companies covered in this report is available at www.macquarie.com/disclosures Macquarie Group 26 April 2018 8