M&A part of Beach Energy’s playbook from 2025 onwards

Brett Woods, a former Santos executive, is now the chief executive of Beach Energy.

Beach Energy’s great unveiling of its strategic review outcome is now a week away, but bets are off that any sort of corporate activity will be part of it – this year anyway.

Recently appointed chief executive Brett Woods gave investors some idea the way the review outcome was heading, at the Macquarie Australia Conference in Sydney last month.

But MST Marquee energy analyst Saul Kavonic has explored the possibilities further as to what could be presented on June 18 as part of the company’s strategy day.

His view is that Beach Energy may pursue mergers and acquisitions to capture any opportunities from larger companies like Woodside and Santos, but they would not happen until the 2025 financial year.

Also, smaller companies which may struggle to gain funding and sustain market appeal, like Carnarvon Energy, Cooper Energy and Strike Energy, may be within the crosshairs of Beach, which counts the Kerry Stokes-backed Seven Group Holdings as its 30 per cent shareholder.

“There could be good synergies for Beach Energy with Santos’ domestic gas assets in particular, if legacy decommissioning costs can be carved out,” Mr Kavonic said.

But he said that Santos may struggle to sell assets at a valuation which makes sense to Beach and there may be competing interest.

Yet under Mr Woods’s leadership, Beach Energy may be able to add value by being a more focused operator of some Santos assets.

“But overall, we think mergers and acquisition opportunities for Beach Energy may prove tough to convert so it is premature to ascribe value here,” Mr Kavonic said.

Instead, he said a turnaround playbook for Beach could be similar to that of Mr Wood’s former employer, Santos from 2015 to 2018, and the initial focus should be cost cuts, alongside a strategic and market reset.

This would then be followed by exploration and bolt-on mergers and acquisition opportunities to add portfolio length.

“We see upside at Beach Energy from rising domestic gas price realisations, ramp up at Otway and Waitsia, a strong cost-out program, capital management ramp-up, the potential for high margin exploration discoveries and possible mergers and acquisitions from 2025,” Mr Kavonic said.

Mr Woods was hired last year and his appointment came after five years of disappointments for Beach Energy investors, thanks to profit downgrades and departures of chief executives.

“The Beach Energy turnaround story is finally gaining momentum,” Mr Kavonic said.