Release Date: August 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Beach Energy Ltd (BCHEY, Financial) reported a 9% increase in revenue to $1.8 billion, driven by higher realized oil and gas prices and the Waitsia LNG cargoes.
- The company maintained a strong financial position with $437 million of available liquidity and a net gearing of 15%.
- Beach Energy Ltd (BCHEY) achieved a 31% increase in Otway Basin production for the fourth quarter, supported by the connection to the Enterprise field.
- The Moomba CCS project reached mechanical completion, positioning Beach Energy Ltd (BCHEY) as a leader in decarbonization efforts.
- The company declared a final dividend of $0.02 per share, resulting in a full-year dividend of $0.04 per share, reflecting strong free cash flow of $163 million.
Negative Points
- Beach Energy Ltd (BCHEY) faced a significant reserve downgrade at the Enterprise field, impacting long-term production expectations.
- Production for FY24 was 7% below the prior year due to lower customer nominations in the Otway Basin, project delays, and weather events in the Cooper Basin.
- The company reported a non-cash impairment charge of approximately $1.1 billion, affecting producing and exploration assets.
- The Waitsia Stage 2 project experienced a delay, with first gas now expected in early calendar year 2025, eroding some of the project buffer.
- The Cooper Basin joint venture faced higher operating and capital costs, impacting overall financial performance.
Q & A Highlights
Q: Can you please share more color on how you're going to balance the need to address Beach's reserve replacement risk with shareholders' expectations of materially stronger capital returns?
A: We haven't taken FID on the Mavis and Hercules campaign. My anxiety about the Otway Basin is more based on the scale of the opportunities. Otway works when you have opportunities that have significant scale. The outcome at Enterprise has made me look much harder at our capital allocation across the broader offshore Otway Basin. β Brett Woods, CEO
Q: Can you outline the pricing upside that Beach might be able to extract across the gas portfolio in fiscal '26?
A: We have over 50 terajoules a day coming off long-term contracts by the end of FY25. Additional volume from Enterprise will also be available. We've been achieving higher prices in the spot market, especially during peak periods. We're also exploring storage options to maximize value. β Brett Woods, CEO
Q: How would you describe Enterprise's production outlook beyond FY25?
A: There should be no impact on production through our FY25 guidance. Enterprise can hold up, but the tail of production will shrink more significantly post-FY26. β Brett Woods, CEO
Q: What is the scale of deals needed to address the underperformance of the portfolio, and how does this impact the 40% to 50% payout ratio?
A: I'm focusing on getting the base business operating efficiently. We have a strong balance sheet and will look critically at any acquisitions to ensure they are accretive. I aim to deliver on cost reductions and maintain strong shareholder returns. β Brett Woods, CEO
Q: Are there any updates on the Cooper Basin JV with Santos, particularly regarding cost structure and production improvements?
A: We've had positive engagements with Santos on cost reductions. We haven't included these potential savings in our current numbers, so any cost reductions achieved will be upside. β Brett Woods, CEO
Q: How are you thinking about the free cash flow breakeven for FY26, given the potential decline in Enterprise production?
A: We still expect to lower the free cash flow breakeven in FY26, driven by Waitsia coming online and ongoing efficiency improvements. β Brett Woods, CEO
Q: Are there any updates on non-core assets like the Bass Basin and New Zealand?
A: We recently ran an asset job through Bass, producing around 22 terajoules a day. For Kupe, it delivers strong free cash flow, but we are open to discussions about selling it due to the lack of political support and growth opportunities. β Brett Woods, CEO
Q: What are the key activities that could impact the timing of first gas from Waitsia?
A: The introduction of gas into the plant has been delayed to September, which introduces a risk of a six-week delay. However, we are working on parallel activities to mitigate this risk. β Brett Woods, CEO
Q: Can you provide more details on the next phase of Otway drilling?
A: We have a campaign of five statutory abandonments and a couple of exploration wells, likely Mavis and Hercules. We aim to update the market on the Otway program before the end of the calendar year. β Brett Woods, CEO
Q: Are there any risks of further impairments related to the recent reserve downgrade at Enterprise?
A: There is plenty of headroom in Enterprise, so no further impairments are expected. β Brett Woods, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
