Beach Energy Limited

BPT Details

FY21 Financial Performance Highlights: Beach Energy Limited (ASX: BPT) is engaged in the exploration and production of oil and gas. The company has updated about its FY21 performance on 16 August 2021.

• Marginal Contraction in Sales: Sales revenue declined by 8% and stood at $1,519 million, pursuant to 4% decline in oil & gas production, 6% decline in sales volumes, and 3% decline in average realized oil prices, partially offset by 1% incline in average realized gas/ethane price.
• Contracting Bottom-line: Underlying EBITDA shrunk by 14% and stood at $953 million and underlying NPAT shrunk by 21% and was registered at $363 million. The unfavorable bottom-line changes were primarily driven by $166 million decrease in revenue, $36 million increase in exploration expenses and $55 million increase in non-operating expenses.
• Cash Flow Movements: BPT reported $127 million of cash as of 30 June 2021. Operating cash flow stood positive at $760 million, which includes $153 million cash taxes. Capital expenditure activities led to a $674 million outflow, primarily attributed to $139 million in exploration expenditure in drilling at Enterprise, Artisan and Ironbark and rest towards development capex.

Source: Analysis by Kalkine Group; Company Reports

Key Risks

BPT’s line of business is exposed to prudent regulatory purview, which may impact company performance. Price fluctuation in oil and gas is highly volatile; considering high price sensitivity of top-line inflow, BPT is exposed to commodity price risks.

Outlook

Production expectations are lower at 21.0 – 23.0 MMboe in FY22 due to lower oil volumes from Western Flank oil. Perth Basin and Victorian Otway are expected to sought high gas volumes. Capital expenditure is estimated at a range of $900-1100 million with increased unit field operating cost of $11.50-12.50/boe.

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

Stock Recommendation

The stock of BPT gave a negative return of ~20.306% in the past one year. The stock is currently trading lower than the 52-weeks’ average price level band of $1.010 - $2.035. The stock has been valued using the EV/Sales multiple-based illustrative relative valuation method and arrived at a target price low double-digit (in percentage terms). The company might trade at some premium to its peers’ median, considering well diversified portfolio of oil & gas production and favourable production expectations from Perth Basin & Victorian Otway. For the purpose of valuation, few peers like Woodside Petroleum Ltd (ASX: WPL), Karoon Energy Ltd (ASX: KAR), Viva Energy Group Limited (ASX: VEA), etc have been considered. Considering cash flows and top-line growth at elevated levels, increased investment avenues, current trading level, and valuation, we give a “Buy” recommendation on the stock at the market price of $1.028, as of 13 September 2021, 10:00 AM (GMT+10), Sydney, Eastern Australia.

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 is 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 the 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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