SXY 0.00% $4.60 senex energy limited

40c price target

  1. 79 Posts.
    This was published by Citigroup on 9th March. I've just pasted a portion of the research.

    Hedges secure positive FY17 OpCF, reduces near term risk profile
    Senex Energy Limited (SXY.AX)
    | Buy/High Risk

    Valuation
    Our target price of A$0.40/share is based on DCF valuation.
    Our DCF valuation is inclusive of value for current Cooper oil reserves plus ~9mmbbls of upside from ongoing appraisal/exploration, value for development of Western Surat CSM project based on our ~A$7.50/GJ long-term gas price.
    Our DCF is calculated using Citi Research's commodity price outlook of US$70/bbl oil (real to 1Q16) from 2019 and 0.70A$/US$, and a discount rate of 11%.

    Risks
    We rate SXY as High Risk given a large portion of our valuation is attributed to unconventional gas, which is in the early stages of a multi-year appraisal process and ultimate economics are uncertain. We think the biggest risk to our Buy rating is the sentiment towards unconventional gas for which appraisal will be long- dated before economics are clearly defined.
    Downgrades to Citi Research Commodities' long-term oil price outlook on an A$ basis below the assumed US$70/bbl with a 0.70 A$/US$ would decrease our price target on SXY, all else being equal.
    If the impact on the company from any of these factors proves to be more or less negative than we anticipate, the stock could deviate from our financial forecasts and price targets.
 
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