Beach Energy underwhelms market with dividend payout despite surge in earnings

The payout to investors overshadowed a 20 per cent jump in earnings that cements expectations that the company is well-placed in achieving its corporate turnaround. Shares slump.

Beach Energy, majority owned by billionaire Kerry Stokes, has underwhelmed investors with a smaller than expected interim dividend despite posting a 20 per cent jump in earnings that fuels expectations that the once troubled oil and gas company is cementing its corporate turnaround.

Earnings for the first half of 2025 totalled $587m, up 20 per cent from the same period one year earlier. The jump was fuelled by a 15 per cent increase in production over the six months.

The result was in line with market expectations, but the market seized on the decision of the company to issue a 2c dividend. The market had expected a 3c divided, and shares fell nearly 4 per cent to $1.46.

Citi analyst James Byrne said the dividend indicated that either the company is seeking clarity on future earnings from a critical growth project or is looking to bolster capital for a possible acquisition.

Beach also narrowed its guidance for the rest of the year. The company said it expects to produce 18.5 million to 20.5 million barrels of oil equivalent from its previous estimate of 17.5 to 21.5 MMBoe.

Recently installed chief executive Brett Woods acknowledged the miss on dividends but urged investors to be mindful that the company is focused on delivering consistency and not one-off hits.

“We are just trying to be as prudent as we can.,” Mr Woods told The Australian.

“This is only the half-year not the full-year and our capital management policy is a full-year one – not a half-year. We have some capital to spend in abandoning some wells in the second half of this year, we have some exploration wells. We just want to make sure that we have clear line of sight to what that looks like and what that costs so we can go into the full-year with a much clearer idea about what our dividend will be. We want our dividend to be sustainable. Once we shift it, we want it to stay there.”

Beach is close to completing its Waitsia stage 2 project, and it revealed gas was on course to be injected this quarter – a timetable that Mr Byrne said heightens the risk of missing its target of first cargo sales by the end of the year.

The dividend overshadowed the strong production numbers and subsequent earnings.

Beach has recently completed works on a carbon capture and storage project with Santos, which is the operator.

Mr Woods has won favour with shareholders with his apparent determination to cut costs. In June 2024 and then just six months into the job, he said Beach would slash spending and trim costs in a bid to make the company a low-cost supplier.

Beach had foreshadowed this by weeks earlier announcing its intention to cut about 30 per cent of its workforce.

Mr Woods said the results are an indication that the strategy to make Beach a low-cost producer is working.

“In nearly every metric, we are inline with consensus. That is a very good indication that we are predictable. One analyst noted earlier, ‘nothing new year’, i.e. we have delivered what we said we could deliver. Operationally, I have taken 30 per cent of the headcount out, as I promised, I have reduced our operating costs per barrel by 20 per cent so we are on track to meet our 2025 cost target.” Mr Woods said.

“I think it is a very good but hopefully very predictable result.”

Still, Beach concedes it has yet to fully earn the trust of Investors – which will be on alert for any sign of previous missteps. In 2022, Beach slashed the estimated gas reserves at its LNG export basin near Perth by 11 per cent after the Waitsia Stage 2 drilling campaign.

Originally published as Beach Energy underwhelms market with dividend payout despite surge in earnings