Stock of the Day - Beach Energy (BUY)
BPT has announced a Transitional Gas Sale Agreement (GSA) with Origin Energy for 2.3PJ over the first half CY2015. These volumes are incremental to the original 139PJ, 8 Year GSA contract, which we assume will ramp up to 48TJ/D from mid -2015. With an estimated 70 infill wells drilled in 2014, which have built productive capacity by a further 10%, Santos is now comfortable that separate liftings can commence from next year.
BPT Operations (Source - Company Reports)
However in light of mixed results from the infill wells across the Cowralli, Big Lake and Moomba North Field and with further reserves bookings currently on hold, BPT appears less convinced. Indeed production into this small GSA will likely provide BPT greater comfort regarding deliverability before triggering the larger 139PJ ORG contract. BPT has confirmed that deliveries into the original ORG GSA will now commence by mid – 2015.
Targeting Key Basins (Source - Company Reports)
With a six well development program now completed across Bauer, the CKS fields online in October, Martlet commissioned at constrained rates of 850bopd, Balgowan/Stunsail expected to be commissioned in April 2015 and Pennington likely to be operational in June 2015, we believe BPT can maintain Western Flank crude production close to the rates delivered in the September quarter.
BPT Daily Chart (Source - Thomson Reuters)
With Santos looking to cut the 2015 capital budget, it could target the A$250m (gross) spend on SACB and SWQ joint venture oil development where economics appear marginal at current oil prices (although this now only represents 20% of BPT’s crude production). We believe there will be further unconventional results ahead of the March 2015 milestone for Chevron to commit to the next phase of testing across the Nappamerri Trough. We also anticipate that guidance could be narrowed to the high end following the December quarter operating result. We like the BPT story and put a BUY on the stock at the current price $1.05.
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