Beach Energy shares hammered after profit misses market estimates
Investors dump shares in the Kerry Stokes-backed group after its profit fell well short of consensus estimates, making it the biggest loser on the ASX 200.
The Kerry Stokes-backed Beach Energy was hammered on the ASX on Monday after revealing underwhelming annual profit and production outlook figures, as chief executive Morne Engelbrecht called for a supply boost as the quickest response to a gas crunch on the east coast.
Beach shares plummeted by more than 14 per cent, the biggest fall on the ASX 200.
A 39 per cent lift in underlying profit after tax to $504m fell well short of analysts’ consensus of $568m as falling production offset higher energy prices.
The South Australian company, which counts Mr Stokes’ Seven Group as its largest shareholder, forecast a potential fall in production in 2023 with guidance of 20-22.5 million barrels of oil equivalent in 2023 after 21.8 million boe last year.
A delivery target of “up to” 28 million boe for 2024 was panned by investors. Beach outlined delivery risks, including lower than expected Otway Basin customer nominations, the potential for Waitsia gas project delays in Western Australia beyond the second half of 2023 and the repeat of wet weather in the Cooper Basin.
“Another re-setting of Beach outlook to the downside, signalling Beach has continued to provide targets that are optimistic rather than conservative across the portfolio,” said Credit Suisse analyst Saul Kavonic, noting the poor reception to its Western Flank downgrade last year.
Beach’s 2023 financial year production forecast was 8 per cent lower than market expectations at the midpoint, while downgrades to consensus are now expected, with Beach also flagging a rise in operating costs to $12-13/boe from $11.74/boe this year.
“The production outlook for 2023 is also significantly lower than consensus and even our 2024 numbers are too high compared to the company’s production target,” Morgans analyst Max Vickerson said. “We expect the market will not react well to this news despite the potential for even higher prices in FY24 as contracts reset and spot LNG sales commence.”
The Albanese government is reviewing the export gas “trigger” as Labor looks for ways release more local supplies and lower high prices.
Allowing companies to supply more gas rather than tightening policies was the best approach, according to the Beach boss.
“There’s a willingness to get more gas to market as we’ve done in terms of our investments over the last couple of years. Any policy that allows for more gas to get into the east coast gas market, the better,” Mr Engelbrecht said.
Beach kept its dividend steady at 1c per share and said global shocks including Russia’s invasion of Ukraine had underscored the importance of gas in the energy system.
In May the company revealed it was hunting for deals, with Mr Engelbrecht hinting it would look to grow production through merger and acquisition activity.
Its $1.6bn deal to buy Origin Energy’s Lattice assets in 2017 made it a major player, expanding from its single Cooper Basin focus to production in five basins including WA and New Zealand.
Beach has also emerged as an LNG exporter through its Waitsia project, with energy giant BP taking supplies from the second half of 2023. It has partnered with Santos in the $220m Moomba carbon capture and storage facility in South Australia, targeting start-up in 2024.
Beach plans to consider carbon capture schemes in both Victoria’s Otway Basin and Western Australia’s Perth Basin.
Chevron’s Gorgon development in WA is the largest carbon capture facility in the world but has been hit by technical setbacks and delays, underlining the huge task ahead for oil and gas producers pinning their hopes the nascent technology can help solve pollution concerns.
Beach’s partner, Santos, has argued it will be an important method for cutting emissions from the energy industry despite only a few projects so far proceeding in Australia.
Beach shares fell as much as 14.6 per cent before closing down 10.3 per cent at $1.66, compared with a 0.45 per cent rise in the ASX.