Senex Energy Executes Hedging Program to Provide Revenue Protection
Senex Energy Limited, a junior Australian exploration and production company, disclosed Wednesday that it has responded quickly to the sharp increase in the Brent oil price, securing a series of put options for the first half of the 2017 financial year (1H FY17).
The put options provide revenue protection over 400,000 barrels of oil, without limiting Senex’s exposure to the upside from higher oil prices. These put options guarantee a Brent oil floor price of $45 per barrel (AUD 62 equivalent) over the six month period, and Senex will fully participate in any rise in Brent oil prices above this level. The details of the hedging program are below.
Senex Managing Director Ian Davies said the implementation of the program provides downside risk protection and allows the Company to cover its operating and corporate cash costs as well as lock in a margin on its oil sales.
“We are committed to remaining agile in this volatile environment and have taken decisive steps to ensure the Company remains cash-flow positive before capital expenditure in 1H FY17.
“Coupled with our recent success in reducing our cost base in support of profit margins at lower prices, our ability to lock these hedges away quickly demonstrates the Company’s resilience in a low oil price environment,” he said.
Details of the Hedging Program
- Type of Option: Put options over ICE Brent
- Strike price: $45 per barrel
- Volume: 400,000 barrels
- Tenor: 1H FY17 (July 1, 2016 - Dec. 31, 2016)
- Premium: $2.4 million
- Upside to oil price preserved: Yes
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