Shine Lawyers sounding out a potential class action against Beach Energy
Beach Energy’s Cooper Basin production forecasts are the subject of a second potential class action.
Shine Lawyers is sounding out interest for a potential class action against Beach Energy, which it says “painted a rosy picture” of Cooper Basin oil production which failed to eventuate.
Fellow law firm Slater and Gordon announced a broadly similar investigation of shareholder interest in such a claim in July, but has not yet lodged an action against the Adelaide-based energy company.
Shine said it would canvass interest from shareholders regarding its own class action against Beach “for allegedly misleading the market with optimistic projections for a declining oil reserve in South Australia’’.
Both the Shine and Slater and Gordon investigations concern Beach’s pronouncements to the market about the performance and future potential of the Western Flank oil assets in South Australia’s Far North.
An investor presentation lodged with the ASX on August 17 says that Beach had had “outstanding drilling results in FY20” and was aiming to maintain its “gross average output above 20,000 barrels of oil per day in FY21’’.
It said most of its development wells were generating an internal rate of return of more than 100 per cent,. with a six month pay back time on average, and horizontal drilling has delivered an eight-times increase in productivity at one and a half times the cost of a vertical oil well.
Beach’s FY21 guidance was set at $900m-$1000m in underlying earnings with production of between 26 and 28.5 million barrels of oil equivalent.
On April 30 those figures were revised following “recent declines in oil production and recent drilling results’’, the company told the ASX in a statement.
The company’s production was downgraded to 25.2-25.7mmboe and Beach said Western Flank oil production was expected to be 4-5 million barrels of oil below previous estimates.
Beach also withdrew its five year outlook and said it would no longer produce a five year forecast in that form.
The company’s shares closed almost 25 per cent lower at $1.27, and have since failed to recover to the $1.68 closing price on April 29, and at one stage traded as low as $1.01.
Beach shares were removed from the ASX100 in early September.
Shine class actions practice leader Craig Allsopp said Beach’s downgrade wiped $900m from the value of the company.
“Investors must have been in disbelief as the company’s market capitalisation plummeted
more than 40 per cent in 2021,” he said.
“Shine Lawyers is investigating whether Beach Energy knew or ought to have known about
the decline in its Western Flank business at the time it issued its bullish earnings guidance
last August
“The firm encourages all investors impacted by the drop in share price to register for the class
action on our website.’’
Slater and Gordon’s claim is broadly the same, saying that Beach “was or ought to been have been aware” that it did not adequately take into account the accuracy of the modelling system used to assess the Western Flank’s oil reserves and that the fields had started to, or would soon come into decline.
Beach cut several dozen staff from is Adelaide headquarters following the downgrade, including its general manager of corporate development and strategy, Matthew Squire, and its general manager for South Australia and Western Australia, Mark Pitkin.
Mr Squire has since taken on the top job at listed renewables company 1414 Degrees.
Beach Energy managing director Matt Kay said in April the group had “now seen a surprise on the downside” from the Western Flank.
The company has been contacted for comment.
Beach shares closed steady at ($1.45).
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