Quarterly Activities and Cashflow Report

Microsoft Word - 4Q 2015 QAR final

Sundance Energy Australia Limited

28 Greenhill Road, Wayville. South Australia. 5034 ACN 112 202 883 Telephone: +61 8 8363 0388 Facsimile: +61 8 8132 0766 www.sundanceenergy.com.au

Continued Execution on Operating Objectives

The Company produced 7,901 Boe/d in 2015, achieving its full year production guidance. Production was 1,266 Boe/d (19.1 percent) higher than in 2014.
Production for the quarter was ~7,801 Boe/d with an exit rate of 8,055 boe/d.
The Company achieved its full year 2015 production guidance despite bringing 11.0 net wells into production compared to guidance of 16.5 net wells.
Adjusted EBITDAX was $66.5 million for the year and $13.1 million for the fourth quarter with Adjusted EBITDAX margin of 72 percent for both periods, despite an approximate 51 percent decrease in realized pricing year‐over‐year.
Cash operating costs were reduced from $15.15/Boe for the year ended 31 December 2014 to

$14.25/Boe for the year ended 31 December 2015.

Growing Business within Cash Flows

Completed 3 gross (3.0 net) Eagle Ford wells in the fourth quarter that achieved peak 24‐hour production rates of 1,965, 1,266 and 863 Boe (average peak 24‐hour production of 1,365 Boe).
Funded all of the Company's 2015 drilling, completion and well facility capital expenditures of $60.7 million with Adjusted EBITDAX of $66.5 million.
20 gross (10.5 net) horizontal wells were waiting on completion at year‐end, of which 7 gross (6.7 net) were Sundance‐operated.

2016

Guidance

The Company anticipates producing 6,800‐7,300 Boe/d during 2016.
During 2016, the Company has hedges covering 1.0 million barrels at an average floor of $50.63 and

2.0 bcf of gas at an average floor of $2.54.

Targeted cash operating costs (lease operating expenses, production taxes and general and administrative expenses) are expected to decline to $10.50‐$12.50/Boe in 2016 primarily driven by:
- Headcount reduction of ~30 percent that occurred in mid‐January 2016, salary reductions, and a variety of other cost‐saving initiatives that have been implemented.
- Implementation of field‐level operational changes in late 2015 and early 2016 as well an on‐going program designed to capture additional cost reductions.
Expected development cost per well in Eagle Ford, inclusive of drilling, completion, facilities and gas tie‐ins to be approximately $5.4 million (based on an average 6,300 foot lateral length well).

Liquidity

Completion of the Company's fourth quarter 2015 borrowing base redetermination resulted in a decrease from $75 million to $67 million. None of the $8 million reduction had been drawn at the time of the redetermination. The Company's Term Loan remains unchanged at $125 million.
As at the date of this report, the Company's oil hedges covered a total of 2.4 million bbls through 2019 with a weighted average floor of $50.42 and ceiling of $80.72.

Activities Report for the Quarter Ended 31 December 2015 Highlights

Operating Results

Unaudited	Units	Three Months Ended 31 December		Year Ended 31 December
Unaudited	Units	2015	2014	2015	2014
Production Summary, net of Royalties		427,404	581,880	1,823,689	1,675,078
Oil Production Bbls		427,404	581,880	1,823,689	1,675,078
Natural Gas Production, excluding flare Mcf		682,226	531,084	2,581,586	1,803,000
NGL Production Bbls		126,173	84,209	393,359	267,952
Total Production, excluding flare Boe		667,282	754,602	2,647,312	2,243,529
Average Daily Production, excluding flare Boe/d		7,253	8,202	7,253	6,147
Flared Gas Boe/d		548	730	648	488
Average Daily Production, including flare Boe/d		7,801	8,932	7,901	6,635
Sales Revenue, net of Royalties	15,901	40,754	82,499	144,994
Oil Sales	15,901	40,754	82,499	144,994	US$000s
Natural Gas Sales	US$000s	1,141	801	4,802	6,161
NGL Sales	US$000s	1,316	2,352	4,532	8,638
Total Sales Revenue	US$000s	18,358	43,907	91,833	159,793
Realised Product Pricing	37.20	70.04	45.24	86.56
Oil	37.20	70.04	45.24	86.56	US$/Bbl
Effect of Hedging	US$/Bbl	9.34	(3.22)	6.49	(0.79)
Net Oil	US$/Bbl	46.54	66.82	51.73	85.77
Natural Gas	US$/Mcf	1.67	1.51	1.86	3.42
Effect of Hedging	US$/Mcf	0.38	0.16	0.22	0.01
Net Natural Gas	US$/Mcf	2.05	1.67	2.08	3.43
NGL	US$/Bbl	10.43	27.93	11.52	32.24
Total Average Realised Price	US$/Boe	27.51	58.19	34.69	71.22
Effect of Hedging	US$/Boe	6.37	(2.37)	4.69	(0.59)
Total Net Average Realised Price	US$/Boe	33.88	55.82	39.38	70.64
NOTE: Production & Revenue figures are presented net of royalties.

Revenue (US$000s) & Production (Boe/d), net of

Royalties

12,000

10,000

8,000

6,000

4,000

2,000

$50,000

$45,000

$40,000

$35,000

$30,000

$25,000

$20,000

$15,000

$10,000

$5,000

Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015

Revenue for the quarter decreased by $25.5 million, or 58 percent, to $18.4 million compared to the same period in the prior year. This decrease in revenue was primarily due to lower realised oil pricing of $37.20 per barrel compared to $70.04 per barrel in the fourth quarter of 2014. This negatively impacted revenue by $14.0 million. In addition, quarter‐over‐quarter production volumes decreased by 949 Boe/d to 7,253 Boe/d which resulted in lower revenue of $9.4 million.

Revenue

Boe/d

Unaudited (US$000s, except per BOE)	Three Months Ended 31 December		Year Ended 31 December
Unaudited (US$000s, except per BOE)	2015	2014	2015	2014
Operating Activity	$ 18,358	$ 43,907	$ 91,833	$ 159,793
Sales Revenue, net of Royalties	$ 18,358	$ 43,907	$ 91,833	$ 159,793
Lease Operating Expenses (LOE)	(4,481)	(3,704)	(18,496)	(13,523)
Production Taxes	(1,792)	(742)	(6,139)	(6,966)
Cash G&A, net of amounts capitalised	(2,741)	(3,403)	(13,085)	(13,501)
LOE/Boe:	$ 6.71	$ 4.91	$ 6.99	$ 6.03
Production taxes as a % of revenue	9.8%	1.7%	6.7%	4.4%
Cash G&A/Boe:	$ 4.11	$ 4.51	$ 4.94	$ 6.02
Adjusted EBITDAX (1)	$ 13,137	$ 40,228	$ 66,526	$ 126,373
Adjusted EBITDAX Margin	71.6%	91.6%	72.4%	79.1%

The Company reduced its cash costs by 6 percent to $14.25/Boe for the year ended 31 December 2015 compared to the prior year. Cash costs include cash paid for LOE, production taxes and G&A, net of amounts capitalised.

Lease Operating Expenses (LOE)

LOE per Boe was $6.99 for year ended 31 December 2015 and $6.71 per Boe for the fourth quarter of 2015 compared to $6.03 and $4.91, respectively, for the same periods in 2014. The primary driver of the increase in LOE per Boe was workovers performed on wells to improve or maintain production and reduce future operating costs.

Production Tax Expense

Production tax expense as a percentage of revenue increased to 6.7 percent for the year ended 31 December 2015 and 9.8 percent for the fourth quarter of 2015, compared to 4.4 percent and 1.7 percent, respectively, for the comparable periods of 2014. The increase in production taxes for the fourth quarter of 2015, was the result of an adjustment for higher than anticipated ad valorem taxes assessed in Texas, (whereas the fourth quarter of 2014 included a lower than anticipated ad valorem tax assessment adjustment).

Cash General and Administrative Costs (G&A)

Cash G&A per Boe, net of amounts capitalized, decreased 18 percent to $4.94 for the year ended 31 December 2015 compared to $6.02 in 2014, primarily due to lower professional fees. The Company has also captured economies of scale in its fixed overhead cost structure due to increased production levels.

Cash G&A per Boe, net of amounts capitalized, decreased to $4.11 for fourth quarter of 2015 compared to $4.51 for the same period in 2014, primarily as a result of lower professional fees.

Adjusted EBITDAX

100%

80%

60%

40%

20%

Q1 Q2 Q3 Q4 Q1 Q2

Q3 Q4

The Company's Adjusted EBITDAX decreased by $59.8 million to $66.5 million (72 percent of revenue) for the year ended 31 December 2015 compared to $126.4 million in 2014 (79 percent of revenue). Despite significantly lower pricing, the Company has been able to maintain relatively high Adjusted EBITDAX margin as a result of cost reductions implemented throughout the year.