Kerry Stokes’ controlled Beach Energy vows to slash spending

On top of staff cuts, Beach Energy’s new CEO has vowed to slash cap ex, halt drilling at an historic gas site and cease a carbon capture project in a bid to finally deliver for shareholders.

Beach Energy, the oil and gas company majority owned by billionaire Kerry Stokes, will slash spending as it vowed to deliver on its promise to become Australia’s leading domestic energy group.

The declaration marks Beach’s attempt to allay shareholder concerns after a series of missteps that has weighed on the company’s share price and seen an exodus of senior management.

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.

Revealing the details of a long vaulted strategy review, Mr Woods on Tuesday said the company would cut capital expenditure by 20 per cent to $450m and reduce unit field operating cost to less than $11 barrels of oil equivalent.

Mr Woods told investors that the cost reductions would provide a solid base to deliver, vowing this time the company will not underwhelm shareholders.

Beach has already begun cost-cutting. In March, Beach said it would cut about 30 per cent of its workforce, and Mr Woods said around 23 per cent of those losses had been implemented, and the rest were imminent.

Brett Woods told investors that the cost reductions would provide a solid base to deliver. Picture: Supplied

Beach also said new drilling would stop in the Cooper Basin, an historical source of gas located mostly in southwestern Queensland and extending into northeastern South Australia Beach also said it will not continue work on a carbon capture and storage project in the Otway Basin in Victoria.

Mr Woods said the economics of the project do not yet work,

While the cost costing has been well received, if Beach Energy is to turn its fortunes around, it must finish the development of the Waitsia Stage 2 project in Western Australia, which was hampered by the collapse of developer Clough in 2022, but is central to the company’s plans.

Beach Energy is hoping to profit from a looming gas shortage across Australia’s east coast,

Mr Woods said Beach is also exploring opportunities to invest in storage – most likely with a partner – to capitalise on the struggles by Australia’s energy industry to develop new gas powered gas power stations.

But the company has repeatedly tested the patience of shareholders and investors, who have been desperate for the company to finally deliver on rosy projections.

Beach earlier this month said it will take a $400m write down after 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 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”.

Beach Energy shares closed down 2.2 per cent on Tuesday at $1.53 each.

Originally published as Kerry Stokes’ controlled Beach Energy vows to slash spending