Beach Energy plans CSG expansion, targets Queensland

Beach Energy is on the hunt for coal seam gas assets.

Beach Energy – the energy producer supported by one of Australia’s wealthiest families – is believed to be targeting Queensland for acquisition opportunities in the area of Coal Seam Gas as it looks to create more scale across Australia’s west and east coasts, say sources.

The understanding is that the Kerry Stokes-backed energy producer has been searching for acquisitions there, at a time that the David Crisafulli-led state government is welcoming new CSG development.

But the challenge is finding potential targets of scale.

Two groups that have caught the eye of suitors of late that are exploring in the area of Queensland LNG are Elixir Energy, which has a $44m market value and has a permit to explore The Taroom Trough.

Another business operating there is Omega Oil and Gas.

But like Elixir, it is not a large business, with a market value at just $120m and may be too small for the $3.5bn Beach Energy.

Another option is Beach buys the Meridian Gas Project in Queensland’s Bowen Basin from its partner Mitsui or WestSide, which operates the project and is owned by China’s Landbridge Group.

It’s a good time to operate in CSG in Queensland, with the newly elected state government there encouraging new projects that will bring jobs and growth.

Much of its strategy rests on the intentions of the billionaire Stokes family, whose company, SGH, owns 30 per cent of Beach.

Another perennial target mentioned for Beach Energy is Amplitude Energy (formerly Cooper Energy), which has seen its share price remain flat in the past year at just under 20c, with its market value at about $500m.

One catalyst for mergers and acquisitions could be the need for a new partner for Amplitude to replace Japan’s Mitsui as a joint owner of the Athena Gas Plant, which is part of the Casino Gas project that the pair own together, 250km southwest of Melbourne.

Since December 2021, the Athena Gas Plant has processed gas and liquids from the offshore Casino, Henry, and Netherby fields, providing control of processing over the company’s Otway Basin gas and extra capacity for future gas developments.

Beach Energy also has Otway Basin assets.

The group has not given up on expansion in the Perth Basin, but billionaire Gina Rinehart’s Hancock Energy, is largely a kingmaker there.

Beach is not in any current talks with Santos about acquisitions, say sources, despite earlier suggestions the former employer of Beach Energy boss Brett Woods could be a seller of assets in Western Australia.

Beach Energy owns oil and gas assets in New Zealand, where gas prices have almost doubled in the past four years when the former government banned new oil and gas exploration.

That part of the company generates about 3 per cent of revenue and remains non core.

It has been offered to private equity buyers such as Jadestone Energy and The Carlyle Group, but they were unprepared to pay up for the unit that has been performing strongly due to robust demand.

Beach Energy generates 33 per cent of sales from east coast gas, 34 per cent from LNG and LPG and 21 per cent from oil.

For the six months to December, Beach Energy generated a 5 per cent increase in sales on the previous corresponding period to $990m and a 20 per cent increase in underlying earnings before interest, tax, depreciation and amortisation to $587m, while its net profit increased 164 per cent to $222m.

It narrowed its production guidance but said its capital spending remained unchanged as shares fell almost 4 per cent on its result on Thursday.

It took a $400m writedown in June last year after lower-than-expected drilling results, with its Waitsia expansion in the Perth Basin later than expected as gas reserve estimates were slashed.