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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
Activities Report for the Quarter Ended 30 June 2016
Highlights
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Operating Results
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Adjusted EBITDAX was $10.3 million and $20.2 million for the quarter and six month period ended 30 June 2016, respectively.
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The Company produced 5,220 and 5,761 Boe/d for the quarter and six month period ended 30 June 2016, respectively. The Company reaffirms its full year 2016 guidance of 7,000 - 7,500 Boe/d.
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Cash operating costs continued to decline from $14.17/Boe for the year ended 31 December 2015 to $12.29/Boe for the six month period ended 30 June 2016.
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Capital Investments
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The Company entered into an agreement to acquire 5,050 acres in McMullen County, Texas prospective for the Eagle Ford with a final purchase price of $15.5 million. The transaction, which closed 29 July 2016, includes:
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Expected production of 600-700 boe/d for the remainder of 2016;
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Total proved reserves of 3.0 mmboe, 1.4 mmboe of which are attributed to producing wells;
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27 gross (9.6 net) wells, primarily operated by Sundance
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Development expenditures of $10.9 million for the quarter ended 30 June 2016 were substantially funded by $10.3 million of Adjusted EBITDAX.
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Participated in the completion of 11 gross (3.6 net) non-operated Eagle Ford wells in McMullen County that are expected to begin production in the 3rd quarter of 2016.
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At quarter-end, the Company was completing 3 gross (2.7 net) Sundance-operated wells in the Greater Anadarko Basin and had 9 gross (6.8 net) horizontal wells, primarily in the Eagle Ford, scheduled for completion starting in the third quarter of 2016.
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Subsequent to quarter-end, the Company entered into a re-fracturing partnership with Schlumberger Limited. 5 gross (4.7 net) Sundance-operated Eagle Ford wells will be re-fractured in Q3 and are expected to generate a 5-6x initial production uplift and a 40-50 percent increase in reserves for each well.
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Liquidity and Capital Structure
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Successfully raised A$80 million in a two tranche placement, resulting in pro forma cash of US$53 million as at 30 June 2016 (inclusive of net proceeds from the second tranche of US$51 million received in mid-July).
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During the quarter ended 30 June 2016 the Company realized gains of $2.8 million on the settlement of commodity hedging contracts. The Company's realised oil price was $52.04/Bbl for the quarter inclusive of realised hedging gains of $9.69/Bbl.
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As at 30 June 2016, the Company's oil hedges covered a total of 1.9 million bbls through 2019 with a weighted average floor of $50.01 and ceiling of $57.93.
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The Company is finalizing arrangements with Nasdaq and BNY Mellon to allow its shares to begin trading on Nasdaq through a Level II American Depositary Receipt (ADR). The Company anticipates trading commencing during the third quarter of 2016.
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Operating Results
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Unaudited
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Units
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Three Months Ended 30 June
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Six Months Ended 30 June
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2016
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2015
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2016
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2015
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Production Summary, net of Royalties
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269,960
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432,438
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601,222
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1,025,402
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Oil Production Bbls
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Natural Gas Production, excluding flare Mcf
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506,587
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642,987
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1,102,870
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1,217,927
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NGL Production Bbls
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72,468
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78,894
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156,501
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149,594
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Total Production, excluding flare Boe
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426,860
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618,497
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941,534
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1,377,984
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Average Daily Production, excluding flare Boe/d
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4,691
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6,797
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5,173
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7,613
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Flared Gas Boe/d
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529
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746
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588
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943
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Average Daily Production, including flare Boe/d
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5,220
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7,543
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5,761
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8,556
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Sales Revenue, net of Royalties
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11,433
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23,933
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21,021
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50,347
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Oil Sales
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US$000s
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Natural Gas Sales
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US$000s
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579
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1,083
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1,427
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2,707
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NGL Sales
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US$000s
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951
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1,423
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1,768
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2,058
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Total Sales Revenue
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US$000s
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12,963
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26,439
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24,216
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55,112
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Realised Product Pricing
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42.35
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55.34
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34.96
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49.10
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Oil
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US$/Bbl
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Effect of Hedging
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US$/Bbl
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9.69
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4.59
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11.92
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4.78
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Net Oil
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US$/Bbl
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52.04
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59.93
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46.88
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53.88
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Natural Gas
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US$/Mcf
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1.14
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1.68
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1.29
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2.22
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Effect of Hedging
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US$/Mcf
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0.34
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0.16
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0.44
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(0.01)
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Net Natural Gas
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US$/Mcf
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1.48
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1.84
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1.73
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2.21
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NGL
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US$/Bbl
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13.12
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18.04
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11.30
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13.75
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Total Average Realised Price
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US$/Boe
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30.37
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42.75
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25.72
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39.99
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Effect of Hedging
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US$/Boe
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6.53
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3.38
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8.13
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3.69
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Total Net Average Realised Price
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US$/Boe
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36.90
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46.12
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33.84
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43.68
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NOTE: Production & Revenue figures are presented net of royalties.
All amounts shown in
Revenue for the quarter decreased $13.5 million, or
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10,000
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$50,000
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in revenue. Production volumes declined primarily due
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9,000
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$45,000
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51.0 percent, to $13.0 million compared to the same period in the prior year. Volumes declined by 2,323 Boe/d which contributed $7.2 million to the reduction
Revenue (US$000s) & Production (Boe/d), net of
Royalties
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5,000
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$25,000
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pump installs on 10 gross (7 net) wells and an
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4,000
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$20,000
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to downtime related to shut-ins for offset fracs (5 gross (4.4 net) wells ) and downtime associated with
8,000
7,000
6,000
$40,000
$35,000
$30,000
additional 12 wells awaiting pump installs at quarter end. No new wells were brought online during the quarter. Flared gas has decreased from 943 boe/d to during the first six months of 2015 to 529 boe/d in the second quarter of 2016. During the third quarter, the Company is completing an upgrade of its treatment facilities which will reduce flared volumes and allow the Company to sell a larger portion of its natural gas.
3,000
2,000
1,000
0
Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016
Revenue Boe/d
$15,000
$10,000
$5,000
$0
Operating Results (continued)
Period over period, realized product prices decreased $12.99 per barrel for oil and a $0.54 per Mcf for natural gas which negatively impacted revenue by $6.3 million.
For the current quarter, inclusive of the effect of hedging, the Company realised $52.04 per Bbl (13.2 percent decrease compared to the same quarter in 2015) of oil and $1.48 per Mcf (19.6 percent decrease compared to the same quarter in 2015) of natural gas, net of transportation and marketing fees.
For the quarter ended 30 June 2016, the Company produced an average of 5,220 Boe/d.
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Unaudited (US$000s, except per BOE)
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Three Months Ended
30 June
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Six Months Ended
30 June
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2016
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2015
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2016
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2015
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Operating Activity
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$ 24,216
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$ 55,112
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Sales Revenue, net of Royalties
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$ 12,963
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$ 26,439
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Lease Operating Expenses (LOE)
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(2,340)
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(4,830)
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(5,323)
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(8,758)
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Production Taxes
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(846)
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(1,377)
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(1,609)
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(3,241)
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Cash G&A, net of amounts capitalised
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(2,074)
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(3,049)
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(4,639)
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(6,888)
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LOE/Boe:
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$ (5.48)
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$ (7.81)
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$ (5.65)
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$ (6.36)
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Production taxes as a % of revenue
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6.5%
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5.2%
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6.6%
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5.9%
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Cash G&A/Boe:
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$ (4.86)
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$ (4.93)
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$ (4.93)
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$ (5.00)
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Adjusted EBITDAX (1)
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$ 10,341
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$ 19,254
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$ 20,182
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$ 41,283
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Adjusted EBITDAX Margin (1)
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79.8%
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72.8%
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83.3%
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74.9%
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(1) Adjusted EBITDAX and Adjusted EBITDAX Margin include realised gain on hedging of $2.8 million and $2.1 million for the three months ended 30 June 2016 and 2015, respectively and $7.7 million and $5.1 million for the six months ended 30 June 2016 and 2015, respectively. Realised gain on hedging is not included in Sales Revenue.
The Company has continued to improve upon its cost structure and has reduced total cash costs per Boe (cash paid for LOE, production taxes and G&A) from $14.17/Boe for the year ended 31 December 2015 to $12.32/Boe in the second quarter of 2016. In absolute terms, total cash costs decreased $4.0 million (43.1 percent) to $5.3 million for the quarter ended 30 June 2016, compared to $9.3 million in the comparable period in the prior year.
Lease operating expenses (LOE)
LOE per BOE for the second quarter decreased to $5.48 as compared to $5.79 for the first quarter of 2016 and $6.96 for the year ended 31 December 2015. This improvement was achieved through several cost saving initiatives as well as on- going field-level improvements designed to continue to drive down LOE. Although most of these cost saving initiatives were in place for the majority of the quarter, additional electrification projects are expected to be completed during the remainder of 2016 which will further decrease LOE costs. In absolute terms, LOE decreased $2.5 million (51.6 percent) to $2.3 million for the quarter ended 30 June 2016, compared to $4.8 million in the comparable period in the prior year.
Production tax expense
Production tax expense as a percentage of revenue of 6.5 percent for the quarter ended 30 June 2016 was slightly lower than the 6.7 percent incurred for the year ended 31 December 2015.
Cash general and administrative costs (G&A)
Cash G&A per Boe decreased 25 percent to $4.86 per Boe for the quarter ended 30 June 2016 compared to the year ended 31 December 2015. The Company has implemented cost reductions to scale in its overhead cost structure to expected production levels. In absolute terms, cash G&A decreased by $1.0 million (32.0 percent) to $2.1 million for the quarter ended 30 June 2016, compared to $3.0 million in the comparable period in the prior year.
Operating Results (continued)
Adjusted EBITDAX
100%
80%
60%
40%
20%
0%
Q3
Q4
Q1
Q2
2014
2014 2015 2015
Q3
2015
Q4
Q1
Q2
2015
2016 2016
The Company achieved a higher Adjusted EBITDAX margin for the quarter (79.8 percent) as compared to the comparable quarter in the prior year (72.8 percent) despite a quarter-over-quarter revenue decline of $13.5 million. The margin improvement was driven by reductions in cash operating costs and an increase in realized gains on commodity hedging.
Adjusted EBITDAX
$45,000
$40,000
$35,000
$30,000
$25,000
$20,000
$15,000
$10,000
$5,000
$-
Adjusted EBITDAX (US$000s)
Adjusted EBITDAX Margin (%)
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