Beach Energy Limited
BPT Details
This report is an updated version of the report published on 06 June 2022 at 3:55 PM GMT.
Business Updates: Beach Energy Limited (ASX: BPT) is engage in the exploration, development and production of oil & gas. The company’s asset portfolio includes ownership stakes in strategic oil & gas infrastructure and assets in Australia and New Zealand.
- BPT provided an update on Bass Basin acreage, wherein seismic re-processing has recognised new Yolla West infield opportunity.
- The company emphasized on the development of Yolla West, which presents as a lower-cost, near-term, and higher-returning investment opportunity. BPT has postponed Final Investment Decision (FID) for Trefoil from the expected timeline of H1FY23. Due to this, the reserves will be recategorized as contingent resources form 30 June 2022.
- BPT is under negotiation process to secure rig for Yolla West, with drilling targeted in 2022/23 summer and this will increase the capacity production rates of 67 TJ/day.
Insights of Q3FY22: The below picture gives an overview of the company’s performance in Q3FY22:
Q3FY22 Summary (Source: Analysis by Kalkine Group)
Key Risks: The company is exposed to risks arising from the adverse movement in the spot prices of oil as it seems to be major revenue stream. In addition, the business could be impacted by extreme change in the climate, which may pause its operation temporarily.
Outlook: For FY22, the company anticipates capital expenditure in the range of $900-$1000 million. The company believes that the recent surge in market demand compounds the spot gas price, Yola West showcase an opportunity to get new gas supply.
Valuation Methodology: Price/Book Value 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: The stock of BPT is trading near its 52-week high level of $1.865. The stock has provided returns of ~11.45% in the past month. The stock has a support and resistance level of $1.750 and $1.920, respectively. The stock has been valued using a P/BV multiple-based illustrative relative valuation and arrived at a target price with a correction of high-single-digit (in % terms). The company can trade at a slight discount to its peers, considering the material business risks, and uncertainty from COVID-19 pandemic. For valuation, peers such as Armour Energy Ltd (ASX: AJQ), Woodside Energy Group Ltd (ASX: WDS), Santos Ltd (ASX: STO), and othershave been considered. Considering the expected correction, solid rally in the past months, current trading levels, volatility in the oil and gas price, and key risks associated with the business, we advise investors to book profit and give a ‘Sell’ rating on the stock at the current market price of $1.860 as on 06 June 2022, 3:33 PM (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 subject to the factors discussed above alongside support levels provided.
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