The Stokes family and Beach shareholders will want a strong vision from new boss
Brett Woods needs to steady the ship at Beach Energy, then articulate to shareholders including the billionaire Stokes family why they should stick by the underperforming outfit.
Shareholders in Beach Energy - including the billionaire Stokes family - would be well within their rights to ask “what have you done for me lately’’.
Broadly, the answer is, “not much”, with the company delivering a negative total shareholder return of 1.8 per cent over the past five years and just 3.7 per cent over a decade.
To be fair, Santos, situated literally metres away on Adelaide’s Flinders Street, hasn’t shot the lights out over the same time frame either, but with major acquisitions under its belt, a place in the ASX20 and a clear plan for the energy transition, its vision for the future is clearly articulated.
Beach will be hoping that new chief executive Brett Woods, when he starts early next year, will bring a bit of that clarity with him.
Beach had hoped to vault itself into the major leagues with the $1.6bn acquisition of Origin Energy’s Lattice conventional oil and gas arm back in 2017.
This followed the Stokes family jumping on to the share register in a big way in 2015. The family’s Seven Group Holdings currently owns a 30 per cent stake.
Beach has stumbled a number of times in recent years however, most significantly with the downgrade of its Western Flank assets in the Cooper Basin back in 2021, which punched a hole in the share price at the time, along with more recent issues at its Waitsia project in Western Australia, some of which were related to the collapse of contractor Clough.
Ryan Stokes, the managing director of the Seven Group Holdings, rejoined the Beach board in July after a five-year stint from 2016-2021.
While it’s tempting to draw a line between the departure of outgoing chief executive Morne Engelbrecht and the return of Mr Stokes, there’s a competing view internally that Woods had been in Beach’s sights for some time.
With Kevin Gallagher not going anywhere soon over at Santos, and Woods keen to make his own mark, shifting his desk 20m to the east provides that opportunity.
The question Woods will need to answer is what will Beach looks like in five or 10 years’ time?
In the short term getting the Waitsia and Otway projects, the latter offshore Victoria, performing well will be essential and Beach will be generating solid free cash flow in coming years, analysts say.
But what’s next?
Citi says M&A might need to play a big part, with the company’s existing reserves looking thin.
There is also a thesis that energy companies generally need to bulk up now in order to survive the energy transition.
Witheringly Citi says “we don’t believe Beach has the scale or capabilities to navigate the energy transition’’.
Woods brings those capabilities at the management level with him, having overseen Santos’s carbon capture and storage project at Moomba, which Beach is a partner in, however he’ll also need to bring a compelling vision for why investors should back the company.
The news from Santos is that Beach has scored a coup in enticing Woods over, with him held in high regard at the $25.5bn company.
The job is now ahead of him to deliver for shareholders - something his two predecessors arguably failed to do.