Beach Energy underwhelms market with weak production outlook

The result will stoke pressure on the oil and gas company to finally deliver on promised increases in production after several false dawns.

Oil and gas company Beach Energy expects to see little production growth if any in 2024 as critical growth projects experience delays, the latest in a string of underwhelming supply outlooks that has dented the standing of the company with investors and shareholders and triggered executive oustings.

The outlook sent shares down nearly 5 per cent and sets 2024 as a defining year for a company, of which Kerry Stokes is its largest shareholder.

Beach Energy said production for the 2024 financial year was likely to total between 18-21 millions of barrels of oil equivalent (MMBoe). The company had not previously set a 2024 production outlook, but the market had expected the company to project supply at more than 24 MMBoe. Should Beach reach the low-end of its guidance, it would market a fall in annual production after Beach said it produced 19.5 MMBoe in 2023.

The production outlook came as Beach Energy said annual profit has slumped 24 per cent as production fell, underwhelming the market.

Net profit after tax for the 12 months totalled $385m, as underlying earnings before interest, tax, depreciation, and amortisation fell 12 per cent.

The stagnant production outlook came as notable growth projects experience delays, but interim CEO Bruce Clement said the company has a strong foundation.

“The resulting production uplifts will come at a time when markets need our products more than ever, where underinvestment in new supply, continuing supply constraints and robust demand are common themes,” said Mr Clement.

Beach Energy interim CEO Bruce Clement. Picture: Supplied

While Beach Energy is hoping to profit from a looming gas shortage across Australia’s east coast, the company’s outlook will test the patience of shareholders and investors that are eager for the company to finally deliver on rosy projections.

If Beach Energy is to turn its fortunes around, it must accelerate development of Waitsia Stage 2 project in Western Australia, which was hampered by the collapse of developer Clou in 2022.

Beach Energy on Monday said it is now targeting first gas from the development by mid-2024, a delay of some six months from its previous forecast, and it expects to spend between $450m-$500m on the joint venture between Beach and Japan’s Mitsui & Co. Beach.

Italian developer WeBuild has since been appointed as the project developer, but Mr Clement said work on the project effectively stopped for several months this year, though he said progress has been made.

“We acknowledge the project has had its problems,” said Mr Clement.

UBS analyst Tom Allen said the company must now deliver on Waitsia and Beach’s campaign in the Perth Basin or risk alienating shareholders and investors, and it shapes as a critical test of Beach Energy’s incoming CEO.

Beach Energy last week named Santos executive Bruce Woods as the company’s new chief executive, after the abrupt oustings of Morne Engelbrecht after a little more than a year in the job.

“With a new CEO appointment Brett Woods last week, investors will also be looking for any change to strategic direction of Beach,” said Mr Allen.

While investors have cheered the appointment of Mr Woods, investors are wary after several previous false dawns.

In 2022, Beach Energy slashed the estimated gas reserves at its LNG export basin near Perth by 11 per cent after the Waitsia Stage 2 drilling campaign.

The company – 30 per cent owned by billionaire Mr Stokes – said the reduction in total proven and provable reserves by 10.6 million barrels of oil equivalent was due to “increased structural complexity in the Waitsia field and poor reservoir quality in the High Cliff reservoir at Waitsia”.

In 2021, Beach Energy suffered its biggest ever one-day share market fall when it suddenly slashed its estimate for reserves from the Western Flank oil reserves in northeast South Australia, triggering class action lawsuits.

Then CEO Matt Kay quickly left Beach Energy before Mr Engelbrecht was appointed.

Originally published as Beach Energy underwhelms market with weak production outlook