Beach Energy confirms fresh, up to $400m writedown

The writedown will test the patience of shareholders, which have been underwhelmed by a series of disappointing results.

Seven West Media chairman Kerry Stokes.

Beach Energy will take a writedown of up to $400m in its annual results after lower-than-expected drilling results, as the company majority-owned by billionaire Kerry Stokes endures another setback.

The result will test the patience of investors, who continue to await a corporate turnaround of a company that is aiming to capitalise on a looming east coast gas shortfall.

Beach has underwhelmed investors in recent years, and in a fresh blow it said it would take a writedown after disappointing drilling results at two sites.

The producer drilled a well in the Kupe gas fields in New Zealand late last year but it delivered low gas flow rates and did not improve despite the efforts of the company.

The results, Beach said, confirmed production from the existing wells had drained gas from this eastern area and it would soon announce an update to reserve forecasts for the region.

In the meantime, it warned shareholders it would take a writedown of $115m to $125m before tax.

Beach also was hit with a writedown of $250m to $275m before tax after its decision not to proceed with drilling in the Bass Strait.

The result is a fresh disappointment to the company, which desperately is seeking to reverse its fortunes.

Beach chief executive Brett Woods who previously worked with Santos.

Beach recently installed former Santos executive Brett Woods as the company’s new chief executive and he has taken a hard line to improving the capital discipline of the company.

Earlier this year Beach said it would axe about 30 per cent of its workforce, a move that reinforced Mr Woods’ aggressive approach to cost cutting.

While investors cheered the discipline, within weeks Beach said its centrepiece growth project, the Waitsia expansion, was not expected to produce its first gas for at least six months, later than previously anticipated, and the project was likely to cost at least 33 per cent more.

Investors now will turn their attention to the outcome of a strategic review implemented by Mr Woods.

Beach said it would announce the findings next Tuesday. Still, investors are concerned that a promised fresh dawn for the company will not materialise.

In 2022, Beach slashed the estimated gas reserves at its LNG export basin near Perth by 11 per cent after the Waitsia stage two 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”.

Originally published as Beach Energy confirms fresh, up to $400m writedown