In today’s daily we have covered stock research on Beach Energy (BUY). 













 
The S&P 500 was down by 16.50points or 0.88 %on Wednesday to 1858.50 points. U.S. stocks were down more than 1 percent in afternoon trading on Wednesday aseconomic data added to worries over the health of the world economy and concern increased about the spread of Ebola. The CBOE Volatility index Wall Street's fear index, was last up 19.9 percent at 27.33 after earlier hitting its highest level since November 2011.

Bank of America lost 5.3 percent, the most since April, to $15.64. Revenue slid 4.3 percent to $21.2 billion. One catalyst for the latest burst of risk aversion came from a batch of weak US data releases which fuelled worries that the US economy might not be immune to a growth slowdown elsewhere. European stock markets suffered even greater losses. FTSE Eurofirst 300 ended 3.2 % weaker at its lowest point since December while Greek stocks fell 6.3%.



SPX Daily Chart (Source – Thomson Reuters)
S&P ASX 200was up by 38.20points or0.73% on Wednesday and closed at 5245.60 points. Rio Tinto’s iron ore production ­numbers for the September quarter recorded a 12 per cent rise on the previous year, to 76.8 million tonnes. Shares in healthcare group CSL rose 1.4 per cent to $73.50 after the company launched its eighth share buyback in nine years at its annual meeting. Telecommunications was the best-performing sector, up 1.6 per cent.

The banks were among the day’s strongest performers. Commonwealth Bank of Australia gained 1.8 per cent to $75.45 and Westpac Banking Corp added 1 per cent to $32.46. Energy was the worst-performing sector, down 1 per cent. SPI is down 42 points at 5179. The Australian dollar is trading at US88.10¢ at 6.49am AEST, compared with US87.31¢ at Wednesday’s local close.
 

ASX 200 Daily Chart (Source – Thomson Reuters)
 
Top Performers on the ASX 200 were :-




 
 
Stock of the Day – Beach Energy Limited (BUY)

Beach Energy Limited (BPT) witnessed a record sales revenue of $1.052 billion from $698 million of last year, i.e., an increase by 51%. This was primarily driven by record oil sales volumes, higher prices and a lower AUD/USD exchange rate.

Sales revenue from production was up by $246 million. There was a $108 million increase in third party sales. Another record was the sales volumes of 10.8 mmboe for FY14. This, however, got equipoised by lower gas sales volumes owing to expiry of some contracts. 




Underlying NPAT (Source – Company Reports)

The Company witnessed a record underlying NPAT of $259 million and a record operating cash flow of $583 million. BPT has a cash balance of $411 million illustrating a strong balance sheet. Further, the full year dividend was of 4.0 cps, up 78%. The record production was of the order of 9.6 MMboe, i.e., up 20%. This included 54% of oil and 46% of gas and gas liquids.

The Company’s Western Flank oil production was in excess of 10,000 bpd for the full year. BPT also reported drilling of 122 wells with success rate of 85%. Other star-performers included expansion of Bauer and Pennington fields with new field discovery at Stunsail. However, even with heathy drilling and various oil discoveries at Bauer-12, -13, Stunsail and Pennington, the net reserves have been down by 8% from the prior year owing to record FY14 production and reserve depletion in PEL 92 and the SACB/SWQ joint venture areas.

BPT’s total assets also increased by $250 million to $2,655 million.

The Company could seek grant of retention licenses over PEL 218 (PRLs 33 to 49) and PEL 92 (PRLs 85 to 104). Its Nappamerri Trough Natural Gas (NTNG) exploration program is also being stated to be in line with farm-in agreement timing.



Share Price Performance (Source – Company Reports)

BPT’s gas and gas liquids production rose by 4% with the reduction in Moomba shutdowns. The Moomba-191 well produced at an average rate of around 1.8 million MMscfd and Moomba-194 produced at a rate of 1.5 MMscfd.


Image (Source – Company Reports)
 
With respect to BPT’s Delhi operations which entails the South Australian Cooper Basin Joint Venture (SACB JV) (Beach 20.21%, Santos Ltd 66.6%, Origin Energy Ltd 13.19%) and the South West Queensland Joint Ventures (SWQ JVs) (Beach 20-40%), net sales gas and ethane production was 19.1 Petajoules (PJ), 1% down on FY13, however, net oil production was 5% higher to about 1.0 MMbbl. 

BPT’s Western Flank Record oil production saw positives based on continual exploration efforts.



Western Flank Oil Migration Path (Source – Company Reports)

Gross oil production for PEL 91 (Beach 40% and operator, Drillsearch Energy Ltd 60%) was seen to be 4.6 MMbbl, which is 280% higher from that of prior year. Bauer field primarily contributed to this production. On the other hand, PEL 104 and 111 (Beach 40%, Senex Energy Ltd 60% and operator) witnessed gross oil production of 1.6 MMbbl which is 4% down owing to natural field decline. Wells at the Spitfire oil field have been completed. PEL 106 (Beach 50% and operator, Drillsearch Energy Ltd 50%) was reported with gross gas and gas liquids production of 0.9 MMboe, which is 60% higher than previous year.

The Company has drilled about 18 wells for the Nappamerri Trough Natural Gas PRLs 33-49 (Beach 70% and operator, Chevron 30%) and ATP 855 (Beach 46.9% and operator, Chevron 18%, Icon Energy Ltd 35.1%). The Company confirmed that the projects are on track with regards to the committed timeframes. However, it appears that there are some challenges BPT is facing with regard to the Beach/Chevron Nappamerri Trough area in view of pilot phase slowdown from Chevron’s end and the backlog inventory of wells drilled by BPT.

The Company recently entered into an agreement with a wholly owned subsidiary of Woodside Petroleum Limited for transferring 70% of its interest in the Lake Tanganyika South Block. BPT also completed an agreement with Drillsearch Energy Ltd (Drillsearch) for oil exploration in ATP 924 within the Cooper Basin. Recently, the Company executed an agreement with the South Australian State Government to acquire a 2.14 hectare parcel of land.


Cooper Basin Acreage (Source – Company Reports)

From International position, gross Egyptian production was 663 kbbl, which rose 6% from that of prior year. Other exemplary efforts included continuation of the baseline metocean study in Tanzania.


Asset Portfolio (Source – Company Reports)


The Company reported increases in depreciation and royalties owing to increased production and sales, and activity on the Cooper Basin Western Flank. We also noted that BPT’s total liabilities increased by $162 million to $784 million. This looks to be in support of tax payable for FY14 of $65 million and increased deferred tax liability of $43 million.

For FY15, the Company expects to complete 140 wells as part of the Australian and international drilling program. Guidance on annual production has been provided as 8.6 to 9.4 MMboe. The Company expects to have three new oil discoveries on the Western Flank in Q1 FY15. Also, BPT supposes to commence the oil linked gas contract with Origin in FY15. Various seismic operations have been also scheduled for FY15. Further, a strong predicted growth in Eastern Australian gas and Asian LNG demand is expected.


BPT Daily Chart (Source - Thomson Reuters)

With the increase in number of wells in the new fiscal year, the reserve replacement ratio is expected to improve. The Company may decide upon its international assets which are not appearing to be very high on returns. Overall, there is a good chance of seeing a change in wind’s direction in some time, which may reap benefits in view of BPT’s efforts towards reassessment of portfolio assets, and on-track and as expected completion of many projects. Accordingly, we retain our recommendation as BUY for this stock at the current price of  $1.255.
 


 
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