Beach Energy Limited

BPT Details

Gas Discovered at Artsian 1 Well: Beach Energy Limited (ASX: BPT) is a miner, explorer, and producer of hydrocarbons. It operates the business in South Australia and Western Australia, Victoria, and New Zealand. As of 22 March 2021, the market capitalisation of the company stood at ~$3.92 billion. On 22 March 2021, BPT announced gas exploration at the Artisan 1 well in licence VIC/P43 situated in Victorian Otway Basin. The well-intersected gas in the Upper Waarre Formation and Flaxman Formation. The well has been cased and kept tapping opportunities to link to the offshore pipeline in the future. Post-casing operations, BPT plans to move the rig to the Geographe field and begin two in-field development wells before further transfer to Thylacine field. BPT expects to commence the first gas from the new Geographe wells in FY22.

Purchase of SXY Cooper Basin Business: On 1 March 2021, BPT completed the purchase of the Cooper Basin business from Senex Energy Limited (SXY) for a consideration of $87.5 million. The purchase completion is subject to a special share dividend of 0.5 cents per share to the shareholders of SXY, besides a 0.5 cents per share dividend distribution for 1H21.

A Look at the 1H21 Results: For 1H21, BPT reported a fall in revenue to $705 million, down by 22% YoY, due to a 38% fall in average realised oil prices. BPT announced the production results for 1H21 at 13 MMboe, up 6% YoY. The production numbers were in sync with the Pro-forma estimate of 13.7 MMboe and with 1H20 actuals. For 1H21, BPT has delivered an NPAT of $129 million and an EBITDA of $407 million. It generated operating cash flows of $296 million for 1H21.

BPT declared an interim dividend of 1 cent per share, fully franked in 1H21, the same as FY20’s final dividend. As of 31 December 2020, the company held a cash and cash equivalents balance of $114 million, up by 4% YoY.

1H21 Result Highlights (Source: Company Reports)

Outlook: BPT has updated its production guidance from 26-28.5 MMboe to 25.5-26.5 MMboe (pre-acquisition) for FY21. The company has also provided Pro-forma production estimate of 26.5 – 27.5 MMboe, post its acquisition of SXY’s Cooper Basin and Mitsui’s Bass Basin assets. It has revised the EBITDA guidance to $900-$950 million from $900-$1,000 million for FY21.

Valuation Methodology: Price to Earnings Multiple Based Relative Valuation (Illustrative)

Data Source: Refinitiv, Thomson Reuters, 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: The stock of BPT gave a positive return of 13.31% in the past one month and a positive return of 25.99% in the past six months. The stock is currently trading slightly above the 52-weeks’ average price level of $0.92-$2.035. The stock of BPT has a support level of ~$1.636 and a resistance level of ~$1.903. We have valued the stock using the price to earnings multiple based illustrative relative valuation method and have arrived at a target price of low double-digit upside (in % terms). For this purpose, we have taken peers like AGL Energy Limited (ASX: AGL), Santos Limited (ASX: STO), Origin Energy Limited (ASX: ORG), to name a few. We believe that the company can trade at a slight discount compared to its peer average, considering the fall in its revenue, earnings, and operating cash flows for 1H21 and given the risks of the ongoing pandemic restrictions and increasing production with the present resource and manufacturing ability. Considering the current trading levels, synergies from recent acquisitions, steady output and sales volume, modest guidance for FY21, and valuation, we give a ‘Hold’ rating on the stock at the current market price of $1.745, up by 1.453% on 22 March 2021.

BPT Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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