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ce3ef461-2d90-4ace-9f75-4c65668d1ec6.pdf
Sundance Energy Australia Limited
32 Beulah Road, Norwood. South Australia. 5067 ACN 112 202 883
Telephone: +61 8 8363 0388 Facsimile: +61 8 8132 0766 www.sundanceenergy.com.au
Activities Report for the Quarter Ended 31 March 2016
Highlights
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Continued Focus on Operating Cost Reductions
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Adjusted EBITDAX was $9.8 million for the quarter ended 31 March 2016. An Adjusted EBITDAX margin of 87.5 percent was achieved through implementation of various measures to reduce cash operating costs and realization of gains from the Company's commodity hedging program.
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The Company produced 6,304 Boe/d in Q1 2016, down 3,277 Boe/d (34.2 percent) compared to the same period in 2015. Production declined as a result of the decision to defer well completions during this period of low commodity prices. Although production for the quarter came in below the low end of the range for 2016 production guidance, the Company reaffirms the full year guidance of 6,800 - 7,400 Boe/d as it has scheduled the completion of several wells during the remainder of 2016 and also expects to increase production from existing wells through various operational optimisation projects that are in progress.
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Cash operating costs declined from $14.17/Boe for the year ended 31 December 2015 to $12.26/Boe for the quarter ended 31 March 2016; a $1.91/Boe (13.5 percent) reduction, through:
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Field-level operational changes implemented in early 2016 reduced LOE to $5.79/Boe (compared to $6.96/Boe for the year ended 31 December 2015); a $1.17/Boe (16.8 percent) reduction. Additional LOE reductions are expected through the remainder of 2016 as the full impact of these changes is realized.
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A 30 percent headcount reduction that occurred in mid-January 2016 combined with salary reductions and a variety of other cost-saving initiatives implemented throughout the quarter resulted in cash G&A of $4.98/Boe. Cash G&A for the remainder of the year is expected to average approximately 20 percent lower than the first quarter.
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Development Program within Operating Cash Flows
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Development expenditures totaled $2.1 million for the quarter ended 31 March 2016. Development activity for the quarter was focused on pump installations and other production enhancement operations as well as capital expenditures related to various field optimisation projects targeted at increasing sales or reducing LOE.
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21 gross (11.5 net) horizontal wells were waiting on completion at quarter-end, of which 8 gross (7.7 net) were Sundance-operated.
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Liquidity and Working Capital
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During the quarter ended 31 March 2016, the Company realized gains of $4.9 million on settlement of commodity hedging contracts. The Company's realised oil price was $42.68/Bbl for the quarter inclusive of realised hedging gains of $13.74/Bbl.
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As at 31 March 2016, the Company's oil hedges covered a total of 2.0 million bbls through 2019 with a weighted average floor of $50.00 and ceiling of $59.37 and an estimated fair value of $13.2 million.
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The Company used cash flow generated during the quarter to reduce accounts payable and accrued expenses which decreased approximately $7.8 million as compared to 31 December 2015.
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Operating Results
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Unaudited
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Units
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Three Months Ended
31 March
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2016
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2015
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Production Summary, net of Royalties
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331,261
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592,964
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Oil Production Bbls
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Natural Gas Production, excluding flare Mcf
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596,283
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574,940
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NGL Production Bbls
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84,033
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70,700
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Total Production, excluding flare Boe
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514,675
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759,487
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Average Daily Production, excluding flare Boe/d
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5,656
648
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8,439
1,142
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Flared Gas Boe/d
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Average Daily Production, including flare Boe/d
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6,304
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9,581
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Sales Revenue, net of Royalties
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9,588
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26,414
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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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848
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1,624
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NGL Sales
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US$000s
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817
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634
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Total Sales Revenue
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US$000s
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11,253
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28,672
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Realised Product Pricing
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28.94
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44.55
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Oil
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US$/Bbl
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Effect of Hedging
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US$/Bbl
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13.74
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4.91
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Net Oil
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US$/Bbl
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42.68
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49.46
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Natural Gas
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US$/Mcf
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1.42
0.52
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2.83
0.14
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Effect of Hedging
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US$/Mcf
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Net Natural Gas
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US$/Mcf
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1.94
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2.97
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NGL
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US$/Bbl
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9.72
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8.97
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Total Average Realised Price
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US$/Boe
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21.86
9.45
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37.75
3.94
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Effect of Hedging
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US$/Boe
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Total Net Average Realised Price
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US$/Boe
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31.31
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41.69
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NOTE: Production & Revenue figures are presented net of royalties.
Revenue for the quarter decreased $17.4 million, or
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percent, to $11.3 million compared to the same period in the prior year. Volumes declined by 3,277 Boe/d which contributed $11.5 million to the reduction in revenue. Period over period, realized product prices decreased $15.61 per barrel for oil and a $1.41 per Mcf for natural gas which negatively impacted revenue by $5.9 million.
For the current quarter, inclusive of the effect of hedging, the Company realised $42.68 per Bbl (13.7 percent decrease compared to the same quarter in 2015) of oil and $1.94 per Mcf (34.5 percent decrease compared to the same quarter in 2015) of natural gas, net of transportation and marketing fees.
Operating Results (continued)
For the quarter ended 31 March 2016, the Company produced an average of 6,304 Boe/d, which includes 648 Boe/d of flared gas. The Company is in the process of upgrading its treatment facility which will reduce flared volumes and allow the Company to sell a larger portion of its natural gas production.
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Unaudited (US$000s, except per BOE)
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Three Months Ended 31 March
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2016
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2015
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Operating Activity
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$ 11,253
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$ 28,672
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Sales Revenue, net of Royalties
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Lease Operating Expenses (LOE)
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(2,982)
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(3,928)
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Production Taxes
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(763)
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(1,864)
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Cash G&A, net of amounts capitalised
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(2,565)
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(3,839)
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LOE/Boe:
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$ 5.79
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$ 5.17
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Production taxes as a % of revenue
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6.8%
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6.5%
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Cash G&A/Boe:
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$ 4.98
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$ 5.05
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Adjusted EBITDAX (1)
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$ 9,841
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$ 22,004
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Adjusted EBITDAX Margin (1)
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87.5%
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76.7%
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Q1 2016 and 2015 Adjusted EBITDAX and Adjusted EBITDAX Margin include realised gain on hedging of $4.9 million and $3.0 million, respectively. Realised gain on hedging is not included in Sales Revenue.
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Despite the prolonged depressed commodity price environment, the Company has continued to improve upon its top tier 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 $12.26/Boe in the first quarter of 2016. In absolute terms, total cash costs decreased $3.3 million (34.5 percent) to $6.3 million for the quarter ended 31 March 2016, compared to $9.6 million in the comparable period in the prior year.
Lease operating expenses (LOE)
LOE per BOE decreased 16.7 percent to $5.79 for the quarter ended 31 March 2016 compared to $6.96 for the year ended 31 December 2015 due to several cost saving initiatives as well as on-going field-level improvements designed to continue to drive down LOE. In absolute terms, LOE decreased $0.9 million (24.1 percent) to $3.0 million for the quarter ended 31 March 2016, compared to $3.9 million in the comparable period in the prior year. Further cost reductions are expected throughout the remainder of 2016.
Production tax expense
Production tax expense as a percentage of revenue of 6.8 percent for the quarter ended 31 March 2016 was consistent with the 6.7 percent incurred for the year ended 31 December 2015.
Cash general and administrative costs (G&A)
Cash G&A per Boe, net of amounts capitalised, increased 1.1 percent to $4.98 per Boe for the quarter ended 31 March 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 $1.3 million (33.2 percent) to $2.6 million for the quarter ended 31 March 2016, compared to $3.8 million in the comparable period in the prior year.
Operating Results (continued)
Adjusted EBITDAX
The Company achieved a higher Adjusted EBITDAX margin for the quarter (87.5 percent) as compared to the comparable quarter in the prior year (76.7 percent) despite a quarter-over-quarter revenue decline of $17.4 million. The margin improvement was driven by reductions in cash operating costs and an increase in realized gains on commodity hedging.
Exploration & Development
The Company's exploration and development activities are focused in the Eagle Ford formation (Texas) and the Mississippian/Woodford formations in the Greater Anadarko Basin (Oklahoma). The Company's development activities for the quarter ended 31 March 2016 are summarised below:
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31-Dec-15 New 31-Mar-16
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Waiting on
Drilling Frac
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Total
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Eagle Ford 95 - 95
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1 15
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16
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Anadarko Basin 66 - 66
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- 5
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5
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Total 161 - 161
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1 20
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21
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GROSS WELLS
NET WELLS
PRODUCING IN PROGRES S
PRODUCING IN PROGRES S
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31-Dec-15
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New
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31-Mar-16
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Drilling
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Waiting on
Frac
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Total
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Eagle Ford
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69.7
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69.7
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1.0
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7.5
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8.5
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Mulhall
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27.7
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-
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27.7
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-
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3.0
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3.0
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Other
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0.1
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-
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0.1
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-
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-
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-
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Anadarko Basin
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27.8
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27.8
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3.0
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3.0
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Total
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97.5
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97.5
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1.0
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10.5
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11.5
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