Beach Energy Limited

BPT Details

Change of Director’s Interest: Beach Energy Limited (ASX: BPT) engages in the production, exploration of oil and gas that produces in five producing basins. It also explores, develops and commercialises gas and liquid hydrocarbons. The company’s director, Matthew Vincent Kay has undergone a change of interest in the company and has acquired 196,465 fully paid ordinary shares and 794,559 Performance Rights in the company.

Q4FY21 Financial Performance:

• The company has recorded revenue growth of ~7% to ~$421 million in Q4FY21, compared to ~$393 million in Q3FY21. Further, the company reported total revenues of ~$1,519 million in FY21, driven by the increased oil price.
• BPT has recorded production of 63 MMboe in FY21.
• The price review is on favourable terms for Beach and Origin that concludes Cooper Basin Lattice GSA.
• The Australian Government has granted $15 million from CCUS Development Fund to Moomba Carbon Capture and Storage (CCS).
• The company ended with liquidity of ~$402 million and net debt of ~$48 million at the end of FY21

Revenue Trend (Source: Analysis by Kalkine Group)

Outlook: The company is focused to progress several projects that aims at reducing emissions by 25% by FY25. BPT is preparing for the commencement of construction activities at Waitsia Stage 2 (Waitsia LNG) and on track to complete Kupe compressor project during H1FY22. It has provided FY21 revised production guidance of 25.2-25.7 MMboe. The company has decided to release the full-year audited result of FY21 and FY22 guidance on 16 August 2021.

Key Risks:

• Climatic Risk: The company is exposed to climatic risk which is uncertain and could impact the company’s operational activity.
• Impact of COVID-19 pandemic- Due to COVID-19 pandemic, the company has been significantly facing challenges in prices, demand/supply of oils and gas that could directly impact the company’s financials.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: As per a recent announcement, Waitsia JV has collaborated with Clean Energy Fuels Australia for new Western Australia domestic gas sales. The stock of BPT is trading below its average 52-weeks' levels of $1.150-$2.035. The stock of BPT gave a positive return of ~2.06% in the past nine months and a negative return of ~14.53% in the past one year. We have valued the stock using an EV/Sales multiple-based illustrative relative valuation and have arrived at a target price of low double-digit upside (in % terms). We believe that the company can trade at a slight discount to its peer average EV/Sales (NTM trading multiple), considering the uncertainty over COVID-19 impact and risk of demand for oil and gas in global market. For this purpose, we have taken peers such as Origin Energy Ltd (ASX: ORG), Central Petroleum Ltd (ASX: CTP), Armour Energy Ltd (ASX: AJQ), to name a few. Considering the healthy balance sheet, increase in revenue, government relief package and the key risks associated with the business, we recommend a ‘Buy’ rating on the stock at the current market price of $1.230, as on 29 July 2021.

BPT Daily Technical Chart, Data Source: REFINITIV

Note 1: The reference data in this report has been partly sourced from REFINITIV

Note 2: Investment decisions should be made depending on the investors' appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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