Sundance Energy Australia Limited

Sundance Energy’ Deferred Consolidation Settlement: Sundance Energy Australia Limited (ASX: SEA) is an independent energy exploration company based out in the USA. The company is into the process of acquisition and development of oil and natural gas resource in the Gulf Coast of South Texas. The company got listed on the ASX in 2005.

The shareholders of SEA agreed for the company’s shares consolidation in the ratio of 10:1, announced on 1 May 2018, at the Annual General Meeting held on 31 May 2018 with the rounding of the shares to the next whole number if the consolidation resulted in a fractional entitlement.

From 13 December 2018, the company’s share started trading under the ticker SEADA on a post-consolidation deferred settlement basis and was trading on this basis until 21 December 2018. The company’s code returned to the original code, i.e., SEA post the completion of the consolidation today. The settlement of trades will be conducted on a +deferred settlement basis and on a normal T+2 basis, i.e., on 28 December 2018.

Earlier, the company had 6,867,696,796 shares outstanding on its Balance sheet which got reduced to 687,424,827 shares outstanding post the shares consolidation.The management assumed that the consolidation will not have any impact on the underlying value of the company as the stock will be trading at ten times the price at which it previously traded.

Fundamental analysis:

• The company reported a 25% increase in total production on a q-o-q basis with the total production till the date of 2,422,526 boe. Boe stands for barrel of oil equivalent.
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• The average daily sales volume was reported at 8,510 for 9M FY18 with a 28% increase on a q-o-q basis.
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• The revenue was reported at $53.8 million with an increase of 74% on a y-o-y basis on account of many wells brought online. It is expected that the revenue for FY18 will be reported at $159.8 million with an increase of 53% on a y-o-y basis.
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• The adjusted EBITDAX increased by 56% on a q-o-q basis and was reported at $30,426 thousand with EBITDAX margin of ~62% during 3QFY18. Additionally, the company expects that EBITDAX will be marked between $250 Mn and $275 Mn in FY19.
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• The company reported a higher loss on commodity hedging along with higher impairment expense and higher finance cost which resulted in a higher amount of net loss attributable to the owners, which was reported at negative $92,867 thousand. The net margin stood at -87.1% 9MFY18 and expected that this year Net income will be reported in a positive number.
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• The company estimates the 2019 production to be reported around 21,000 - 22,000 boe/d and EBITDAX around $275 million. The projected growth will drive Net Debt to EBITDAX to 1.2x in FY19. There will be no debt maturities through late 2022.
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• In November, the company increased its borrowing base by 40% to $122.5 million.

Financial Key Metrics (Source: Company Reports)

Meanwhile, the stock has fallen 54.62% in the past six months as of December 21, 2018. From the technical standpoint, the scrip price has even crossed the lower band of the Bollinger band, and the Relative Strength Index (RSI) indicates the stock to be in a highly oversold position. The trend is expected to break with a strong bullish movement expected on account of shares consolidation and better financials for the FY18 and future. However, by looking at share consolidation and current trading scenario, we give a “Hold” recommendation on the stock at the current market price of $0.300.
 

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