BRISBANE, Australia -- There aren’t many oil and gas executives synonymous with film-star status, but Senex Energy Ltd. managing director Ian Davies carried an aura of significance at Hart Energy’s recent DUG Australia conference and exhibition where he delivered ambitious targets aiming to almost triple production during the next three to four years.

Fresh from financial year results that yielded a net profit of $37.9 million from record sales that increased 24% to $170.9 million and underlying profit that rose 3% to $44.7 million, but fell short of the consensus estimate of $57 million, Senex’s shares fell 9% as the company forecast production of 1.4 million boe for the coming year. That represents a marginal increase on a record 1.38 million boe during the past year.

At DUG Australia, Davies revealed his long-term vision for Senex that stretches beyond the immediate focus on looming horizons.

From being crippled from the floods that devastated Queensland and the Cooper Basin in 2010-2011, Davies has taken the company to impressive heights. Senex has been able to achieve 300% reserve oil replacement during the past three years while increasing production to a compounded growth of about 80% during the past four years.

Davies was warmly received at the conference, which he praised for having inspired a global cross-pollination of value and innovation between the United States and its historical ally. “I think the conference is a great example of merging markets, not emerging markets, but merging markets between North America and Australia. I commend the guys for doing it.

“I think Australia is a small island nation dependent on foreign capital, and I don’t think that applies to just capital. I think it also applies to technology. So I think importing learning from the North American market into Australia is absolutely critical to success, and I think conferences like DUG can only enhance that,” Davies said.

Davies, who took the helm at Senex in mid-2010 and has established a proven track record for delivering rapid growth, outlined the vital role that gas would play in Senex’s pursuit of delivering aggressive targets during the next four years.

He said from a launch pad of having acquired a large operating position consisting of more than 40% of the Cooper Basin, Senex had invested significant time and money trying to understand every part of the basin as a major asset portfolio containing both conventional and unconventional oil and gas plays.

“Our oil business is cash flow and it is what we worked very hard to build up and get a big land position in the Cooper Basin over the past four years,” Davies said. “We also had a position in the Queensland Surat Basin, but gas is going to play a major role.

“From where we are right now, our 2p reserves are 41.6 million barrels equivalent, and we are targeting a 200% reserves replacement ratio through to the end of FY-15.

“So if we are doing nothing else other than replacing our oil reserves at 200%, (we are) producing 1.4 million barrels of oil, but we are targeting to produce a lot more than that both in oil and gas. We are targeting 100-150 million barrels of oil equivalent at the end of FY-18 and production of 3-5 million barrels of oil equivalent in FY-18,” he continued. “Those are fairly lofty goals from where we are currently at. More than doubling of production and reserves over the next four years with growth targets that does not include doing a big corporate M&A activity. It does not include doing a big equity raising and buying other stuff. It’s from the existing portfolio we have.

“The emphasis on growth has to be our 2p gas reserves with gas. The key to gas is getting big swathes of reserves and having them close to production, and that is what we are going to try and do in the coming years.”

As part of this high-risk, high-reward strategy in the unconventional gas space, Davies said Senex had farmed-out to Origin Energy Ltd. for a $252 million work programme in the Cooper Basin in terms of which Senex would be free carried for up to $186 million.

“My view is we need to have success finding conventional gas as well and it’s the same old way of new 3D seismic, new ways of interpreting that seismic and drilling conventional gas discoveries both structural and stratigraphic,” he said.

Senex will drill 16 wells in the next financial year in both the Cooper and Surat basins, while aiming to “squeeze more out of oil reserves where you might have an 18% recovery factor when you want 40%.

“But what about our gas projects?” Davies asked. “Our gas projects cover every plateau, conventional gas structural traps, conventional gas stratigraphic traps, tight gas. Most of the Cooper, as a general rule, is pretty tight.

“There’s unconventional gas, deep coals that have not been produced in commercial quantities in the Cooper. But it’s all there,” Davies said. “It’s a massive opportunity for us and for all the players in the basin. But you’ve got to put in effort. You’ve got to put capex aside, you’ve got to incentivize your staff and hold them accountable for it on each and every play type. Otherwise it never gets done.

“The oil business is absolutely fantastic for marginal cash flow, it will be a mainstay of the business going forward. We are spending a lot of money and time replacing those reserves and producing cash flow,” he continued. “Gas however, is the key to a long-term stable business. Albeit producing lower margins, gas has high cash flow and much more longevity. The gas business lasts 15 to 20 to 25 years and the oil business, as wonderful as it is, lasts five to eight.

“So what we are doing in the Cooper Basin in particular is concentrating on getting as much cash flow as we possibly can from the oil business while continually replacing those reserves, but gas will end up playing a very important role in the future production mix of Senex.”