Beach Energy trims production forecast
Beach Energy pared annual production guidance due to weakness in demand and delays in bringing a new well online.
South Australian producer Beach Energy saw its underlying half-year net profit dip by 2 per cent as a fall in production offset higher oil and gas prices.
Underlying net profit after tax fell 2 per cent to $274m, about 3 per cent higher than an RBC forecast, after a decrease in sales and production volumes. Underlying earnings of $622m were in line with analyst forecasts.
Beach narrowed its production guidance for the 2020 financial year to a 27m boe to 28m boe range from 27m-29m boe previously and boosted its capital expenditure guidance to $875m to $950m from $750m-$850m.
The company’s underlying earnings guidance was also tightened to $1.275bn to $1.35bn from a prior $1.25-$1.4bn band.
New drilling campaigns are planned for South Australia’s Otway Basin and Western Flank and the Tawhaki prospect in New Zealand while a final investment decision on the giant Waitsia Stage 2 prospect in Western Australia’s Perth Basin is scheduled by August.
A fall of more than a third in the price of spot gas has unsettled energy producers nervous on the medium-term outlook for the fuel.
However, Beach said 99 per cent of its gas sales on Australia’s east coast were sold under contract in the first half of the year, shielding it from any immediate fall-out.
It noted LNG imports to the east coast would require domestic gas prices in excess of $9 a gigajoule if long-term LNG prices were as low as $US6 per million BTU.
RBC said the result was as expected with the revised guidance likely to grab the market’s attention.
“Most notable is the increase to capex guidance of $110m at the midpoint,” RBC analyst Ben Wilson said.
“It is not surprising to us that one of the main drivers of that is an infrastructure upgrade to its western flank oil facilities to support higher output beyond FY20.”
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