Beach Energy mute on Waitsia project timings as quarterly earnings fall
Waitsia is a growth project for Beach Energy but it has suffered a spate of delays and the company disappointed the market by staying quiet on when the development could produce its first gas.
Beach Energy has said it is making progress on its Waitsia gas project, but offered no concrete timetables for a project that it has earmarked to accelerate its corporate turnaround after a troubled couple of years.
Beach said in May its Waitsia Stage 2 project in Western Australia – a key pillar of Beach Energy’s growth strategy from which the company had targeted first gas by the end of 2023 – would be delayed by labour shortages. The company said it was unclear on when it would be able to deliver gas to customers.
The company had earlier said the project had been hampered by the collapse of Clough.
As Beach said sales revenues for the fourth quarter totalled $450m, down on the $504m reported in the fourth quarter of 2022, Beach chief executive Morne Engelbrecht said some key issues regarding Waitsia had been overcome.
“Significantly, the Waitsia Stage 2 project is progressing, and while there have been some challenges resulting from the now resolved financial issues with construction contractor Clough, there continues to be skilled trades getting the plant ready for first gas,” he said.
The lack of guidance was a mute point for the market that focused instead on Beach’s higher-than-expected quarterly revenues. Beach shares rose more than 3 per cent, and Citi Group analyst James Byrne said he believed timings would be revealed next month when the company reveals its full-year financial results.
“(Beach) is yet to reinstate guidance for Waitsia inferring hiring of the electricians and/or on-site productivity has continued to be poor; however we remain cautiously optimistic guidance will come in August,” he said.
The timetable shapes as critical for Beach as it seeks to turn its fortunes after a period of difficulties. Last year, Beach slashed the estimated gas reserves at its LNG export basin near Perth by 11 per cent after the Waitsia Stage 2 drilling campaign.
The company – 30 per cent owned by billionaire Kerry 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”.
Seeking to repair its standing, Beach has ramped up efforts to bolster production in a bid to capitalise on a looming supply shortage across Australia’s east coast.
But production continues to be sluggish. Beach reported production during the fourth quarter of five million barrels of oil equivalent, down 10.7 per cent from the same quarter one year earlier but up on the 4.5 mmboe that the company reported in the third quarter.
The figure was below market expectations, as Beach saw weaker-than-anticipated output from the Cooper Basin and Otway Basin.
The result comes just days after Beach said Seven Group boss Ryan Stokes was appointed as a director, helping his father and billionaire Kerry Stokes tighten his grip on the oil and gas company.
Kerry Stokes’ Seven owns just over 30 per cent of Beach Energy.
Ryan Stokes previously held the same role at Beach until 2021 before stepping down to become an alternative director, and the resumption of the role comes as the gas company endures a difficult period.